U.S. Green Card holders, also known as U.S. Permanent Residents, whether living inside or outside the United States, are taxed on their worldwide income exactly as a U.S. Citizen. If you are living overseas and you have won the Green Card lottery, or were administratively accepted for a Green Card via your U.S. spouse or any other reason, you will quickly be accustomed to these four numbers: 1040
From the date your Green Card was made available to you, this could potentially make your first tax year as a U.S. Permanent Resident very complicated and place you in a Dual Status category. Dual Status essentially means you were a Non-Resident and became a U.S. Resident for part of the year. There are limitations on which filing status can be used and deductions and credits that can be claimed. Additionally, if you have the option to elect yourself as a U.S. Resident for the entire tax year, the tax implications can be very complicated. All of the aforementioned areas should be discussed with our International Tax Experts.
If you are a U.S. Green Card holder, after the Dual Status period is over, you are required to report annually on your worldwide income. This means that even though you are living abroad and earning the money outside of the United States, you must report all incomes that are being earned including:
- Paychecks
- Self-employment
- Interest income
- Rental income
- Dividends
- Or any other type of income
This does not mean that you will be taxed twice as the IRS generally prevents double taxation from taking effect. This is done by allowing individuals to claim either the foreign tax credits that offset the U.S. taxes, or the foreign earned income exclusion.
In addition, you will be required to disclose your ownership, whether direct or indirect, in foreign entities to the Internal Revenue Service. You may also have to disclose any financial interest in any foreign owned bank account(s) at any point during the year. Additionally, if any of your bank accounts, either separately, jointly, or signature authority thereon, exceeded $10,000 USD at any point during the year, this will need to be disclosed.
XPAT 1040 specializes in international tax compliance for Green Card holders living, relocating, and retiring abroad.
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