Dual U.S. Citizenship is ever more common due to our global economy and the lure of attractive investment, acquisition and employment in the United States and elsewhere. This leads to special tax circumstances such as the possibility of double taxation for dual citizens who need to consider how to avoid two governments dipping into your income along with tax residency, foreign account reporting and wealth transfers.
If you are a U.S. citizen and have dual citizenship in another country, you must file taxes in the U.S. regardless of where you live and where you earn your income. Dual citizens who are living abroad may owe taxes to both the U.S. and the country in which they earn their income.
Happily, dual citizens can take advantage of three income tax breaks:
- The foreign earned income exclusion, that excludes up to $120,000 of your foreign earned income from U.S. taxes.
- The housing exclusion (or deduction), to exclude or deduct certain foreign housing costs.
- The foreign tax credit, to reduce your U.S. tax liability by the amount of foreign taxes you paid to the other country of which you are also a citizen.
- Some countries have tax treaties that eliminate a citizen’s tax liability, meaning that the citizen will only have to pay taxes in one country.
Unsurprisingly, the complexities in tax filing and liability for dual citizens can be enormous with tax residency for the U.S. tax system categorizing a person as either a resident alien or a non-resident alien.
If you need guidance on these or other tax issues, we welcome you to a free Discovery Session by visiting: New Client Application or https://calendly.com/d/46r-49m-93k/10-minute-intro-call.