No menu items!

COSTA RICA'S LEADING ENGLISH LANGUAGE NEWSPAPER

HomeBusinessWhat's new this year in US expat taxes

What’s new this year in US expat taxes

While it’s nearly impossible to master the U.S. tax code, you don’t need to be a guru on the subject to demonstrate to your friends how up-to-date you are. Below are some important tax facts that every American expat living in Costa Rica should know for the current tax season:

1. Your U.S. federal tax return is NOT due April 15. Yes, that’s right. Expats overseas on April 15 are granted an automatic two-month filing extension until June 15 and, if you need more time, an extension can be filed.

Note that if you owe taxes, you should still make a payment by the U.S. deadline or interest will start to accrue. The regular U.S. tax deadline is actually April 18 this year due to a holiday in Washington, DC. This gives taxpayers three extra days to make a tax payment. Payments can be made online at www.irs.gov/payments.

2. The tax benefits of being overseas have increased and decreased.

Increases: The Foreign Earned Income Exclusion, which reduces your taxable income, increased from $100,800 in 2015 to $101,300 for 2016. If married and both spouses work, each spouse is able to claim the exclusion. In addition, you may also be entitled to the Housing Exclusion which further reduces your taxable income by allowing for a deduction of rental expenses.

Decreases: Beginning with your 2015 taxes, you can no longer claim the additional child tax credit if you claim the foreign earned income or housing exclusion.

3. Reporting of Non-U.S. accounts will change in 2017. FinCEN Form 114, more commonly known as the FBAR, is filed separately from your federal tax return. The FBAR is required if you had over $10,000 among all of your non-U.S. financial accounts at any point during 2015.

Don’t worry: this form does not trigger any taxes. Your 2015 FBAR is due by June 30, 2016 and can be filed online.

Bonus Fact: Starting with your 2016 FBAR, the deadline will change to April 15, 2017 and an extension will be available.

4. Thieves are making it harder to get refunds. Identity theft and tax scams have increased rapidly. Thieves steal taxpayer information and file fake tax returns claiming refunds. To combat this growing problem, the IRS will be validating 20 new pieces of information on tax returns in 2016.

While these extra measures help protect taxpayers, they may also slow the processing of some returns which could mean a delay in issuing refunds. You can check the status of your refund online at www.irs.gov/refunds.

5. Other deductions and credits are available. Don’t forget about potential deductions and credits for college tuition, home energy incentives, traditional IRA contributions and alimony paid. Dependent care expenses may also provide a tax credit which can even include expenses related to a live-in maid if both you and your spouse work.

6. Most expats are exempt from the health care requirement. Also known as Obamacare, the Affordable Care Act requires everyone to have health insurance. The good news is that if you qualify for the Foreign Earned Income Exclusion, you are exempt.

To claim the exemption, file form 8695 with your tax return.

Happy filing!

Kaitlin M. Krozel is a CPA and former expat. Her firm, Krozel Capital, specializes in tax preparation for U.S. citizens living abroad. 

Trending Now

US Warns of Investment Risks in Nicaragua

The United States warned its citizens on Saturday about the risk of investing in Nicaragua following the recent approval of a border security law...

Costa Rica Detains Two in Killing of U.S. Citizen

The Judicial Investigation Agency (OIJ) has arrested two suspects in connection with the murder of American businessman Eshraghollah Vatani. Vatani was reported missing at...

The Day Costa Rica Stopped to Celebrate Claudia Poll’s Olympic Victory

In the decades I have lived here, there were two sporting events that were so big that the country came to a brief standstill....

Chinese Influence in Costa Rica Grows from Business to Education

Will the 21st Century someday be known as the Chinese century? Time will tell. They seem to be off to a good start when...

El Salvador opposition challenges Bukele indefinite reelection

An opposition lawmaker in El Salvador filed a lawsuit with the Supreme Court on Friday challenging the constitutionality of indefinite presidential re-election, recently approved...

Costa Rica’s Barra Del Colorado: The Perfect Place to Disconnect and Recharge

One of the greatest gifts Costa Rica offers its visitors is the rare chance to truly disconnect from the outside world. This modern world...
spot_img
Costa Rica Coffee Maker Chorreador
Costa Rica Coffee Maker Chorreador
Costa Rica Travel Insurance
Costa Rica Rocking Chait
Costa Rica Travel

Latest News from Costa Rica