September 16, 2022
Many people who are considering moving abroad wonder how they will keep their U.S. residency and what the tax implications will be. It is critical to fully understand your requirements so that there are no surprises come tax season. If you want to keep your U.S. home while living abroad, here are a few U.S. ex-pat tax return facts to consider.
The most convenient way to maintain a functional U.S. address while living abroad is to use a virtual mailbox service that you can activate online. This service scans, holds, and offers mail forwarding services for a few dollars per month. Other services, such as UPS (United Parcel Service) or USPS (United States Postal Service), will require your physical presence to activate a mailbox service.
Life continues in the United States, and requiring mail to be shipped is another reason to have an address. Fortunately, keeping a U.S. address while living abroad is relatively simple. This article will help you know more about tax filings, tax guides, and how to receive mail as a digital nomad.
Some expats choose to use the address of a friend or relative in the United States. However, if that address is in a state with an income tax, which is the majority of states, the tax authority may contact you about tax filing a tax return – even if you've never lived in that state. Resolving the issue by demonstrating your non-residence in the state can be a time-consuming and frustrating process.
There are a few considerations if you're in the process of moving and aren't sure how your U.S. expat tax return will be affected by maintaining a U.S. address while living abroad. Having proper tax guides is a crucial step for moving abroad. As you'll see below, simply maintaining your U.S. home is not the same as renting it out.
There are eight significant steps that green card holders can take to minimize complications upon re-entering the border to show immigration officers that they expect to maintain their permanent residence:
A permanent resident who will be traveling outside the United States for a period of six months to one year should take these steps. A re-entry permit is required if you leave the country for more than a year.
Taking these steps does not guarantee that the permanent resident will have an easy time re-entering the United States, but it increases the likelihood. This list is not exhaustive, so any additional documents demonstrating a permanent resident's intent to settle in the United States will be helpful.
Renting out your U.S. home can be a nice way to recoup the costs of maintaining a home while you're away. However, it comes with its own hurdles when it's time to file a U.S. expat tax return. Renting is also influenced by the number of days your home is used during the year.
Perhaps you want to keep your home in the United States but don't want the added responsibility of renting it out. In general, you will have no additional tax liability in this scenario. However, it is dependent on how you intend to qualify for the Foreign Earned Income Exclusion (FEIE). The Physical Presence Test will almost certainly not affect your U.S. tax return.
However, if you use the Bona Fide Residence Test, you may be required to provide a reason for keeping your U.S. property if you are living full-time in a foreign country with no hope of returning to the U.S.
This is because the IRS only considers you a bona fide resident if you do not intend to return to the United States – and maintaining a residence may be interpreted as an expectation of returning at some point.
The question of what address to enter on their tax return arises for many Americans who live abroad. At first glance, the answer appears obvious - use your current address. The address on your tax return should be one where you can easily and quickly receive any correspondence from the IRS.
But what if the mail system in your country of residence is slow or unreliable? What if you plan to relocate before filing your next expat tax return? Many U.S. financial institutions require you to provide an actual U.S. address (not a P.O. Box) to keep your account open.
By using a virtual mailbox, you will have instant, dependable access to your U.S. mail and will be able to keep your U.S. bank accounts without fear of triggering state tax inquiries. As a result, for many expats, the minor cost is worth the significant time savings during tax season—and throughout the year.
Permanent residents must clearly show that they intend to make the United States their permanent home. The steps outlined above will assist you in demonstrating that you consider the United States your home and intend to relocate permanently to the United States.
Rather than relying on friends and family to forward your mail, a virtual mailbox service is a better option. But what exactly is a virtual mailbox, and how does it work? You can get a personal, non-PO Box mailing address for a monthly fee. It is preferable to have an address in a state without an income tax, such as Florida or Texas.
You will receive an email notification when mail is delivered to your virtual mailbox address. The mail is scanned or forwarded to you at your request. Some services will scan the first page and email it to you, allowing you to decide whether or not to "open" the rest of it.
Here are some of the likely reasons why using your parents, friends, or cousins who live in the United States to forward your mail is probably a bad idea:
Moving to a new country that's not your home can be incredibly challenging. But with the right information in hand, you'll be able to prepare for any potential difficulties. This article discusses some of the challenges you might face, plus how to overcome them.
If you are planning on moving abroad, set up your mail service so that you can read your mail from wherever you go. Speak to a local postal service expert to help you with this process.