The TCJA: Changes For American Expats OR Not?

Tokyo, Japan
Many American citizens who live outside the US have for years raised concerns about the United States' Citizen-Based-Taxation System. They may have been hopeful when tax reform was being proposed but have been disappointed that their concerns have been ignored. 

The new tax reform bill, Tax Cuts and Jobs Act called TCJA (pronounced tick-jah) has brought about massive changes in the way individuals are going to be taxed but not much has changed for American Expats. 

As most of my readers know, if you are a US Citizen, you are required to file a US tax return annually. The information needed to be filed along with your tax return via Form 8938, Form 3520, Form 5471, Form 8865 remains in place. So does the requirement to file Form 114 AKA the FBAR. Not only does non-compliance with these rules and regulations come with stiff penalties, they also make banking in the countries of residence burdensome for expats. Most foreign banks do not want US citizens for customers as they have to comply with FATCA requirements. 

The Net Investment Income Tax has also remained in place, therefore high earning expats with passive income may find themselves subject to this tax.  

On the good side, the Foreign Earned Income Exclusion {FEIE} and the Foreign Tax Credit {FTC} have not been repealed. If you want to read in detail about what this is, my post is here and also here. An expat can exclude up to $104,100. And for those who go over the limit, they can take the tax paid in the country of residence as a credit. The United States has tax treaties with many countries so most expats can avoid double taxation. 

New Points To Look Out For under TCJA:

There has been a major shake-up in the tax brackets, deductions and exemptions. The Standard Deduction has increased substantially. You may now find yourself in a lower tax bracket than you were in earlier. 

If you are planning to move in to the United States, the Moving Expense deduction is no longer available for moves made after January 1st, 2017. 

The Affordable Care Act mandate has been eliminated. 

The big and most onerous change that US Expats will find is with their ownership in foreign corporations. Under the TCJA, U.S. shareholders owning at least 10% of a foreign subsidiary may end up paying a one-time "expatriation tax" on profits earned abroad that have not been taxed previouslySome US shareholders will have this change impact their 2017 tax returns. 

This is a very short and simplistic analysis of the tax change for owners of foreign corporations among other aspects affecting expats. Please consult your tax professional if this applies to you and get guidance. 

Most tax professionals are working with and trying to understand the new law. We await more guidance from the Internal Revenue Service. As always look out for more coming through this space from me. 

Bibliography: Tax Reform and Jobs Act


As always, read my disclaimer here. Please consult a qualified tax professional for your unique tax needs. More of my contact information is on my website,



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