Taxes for Expats: New ‘Tax Cuts and Jobs Act’ brings big changes for American expats

The Republican-sponsored “Tax Cuts and Jobs Act” became the law of the land on December 22, 2017. The bill “amends the Internal Revenue Code (IRC) to reduce tax rates and modify policies, credits, and decisions for individuals and businesses.”

Taxes for Expats, a women-owned business in New York that works exclusively with Americans living abroad, breaks down the advantages and disadvantages of the act as it applies to expats.

First, some bad news:

  • The deduction for moving expenses and the exclusion for taxable wages received as reimbursement for expenses has been suspended for everyone except military servicemen and servicewomen and their dependents.
  • US individuals and US corporations owning shares in “Specified Foreign Corporations” will pay a mandatory repatriation tax on previously untaxed foreign earnings of the corporation. Under the old rules, foreign corporate earnings were not taxed by the IRS until distributed to shareholders.
  • Taxpayers paying property tax on foreign real estate are no longer entitled to a tax deduction unless the property is being used as a rental business.

Now, the good news:

  • The new $10,000 limit on deduction of state and local taxes does not apply to rental businesses. This is great news for expats who are renting out their property in the U.S. while living overseas.
  • The capital gains exclusion that previously applied to selling your primary residence remains in place. However, expats should note that, to qualify for the exclusion, the homeowner is required to have lived in the residence for two of the past five years. The original plan was to extend the requirement to five of the past eight years, so keeping the old timeline in place is great news.
  • Though expats living outside the U.S. for more than 330 days per year were already excluded from paying any penalties imposed for not maintaining the minimum essential coverage under the Affordable Care Act, beginning in 2019, these penalties have been eliminated entirely, so expats will no longer have to keep careful count of the number of days spent outside the country.

Not sure if any of these new rules apply to you?

Taxes for Expats offers a free introductory consultation.

Our team of professionals will identify exclusions and deductions to which you may be entitled that can help to ease your tax burden.

About Taxes for Expats:

At TFX we have been preparing taxes for U.S. expats for over 25 years and have clients in 175 countries.

Simple, affordable, smart. We offer the same level of service online that you would receive by visiting our office – without having to leave your home. We make customer service our highest priority – and are always ready to answer your questions.

Living abroad presents enough challenges – filing your U.S. taxes shouldn’t be one of them.

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