Filing U.S. taxes as an expat

Today, April 15th, is tax day in the United States.

And, you know, when I started a blog about Happy Moments - call me crazy - but I never thought I'd write a post titled "Filing U.S. taxes as an expat." How times do change.

What this means, in a nutshell, is that today is the day by which you're supposed to have filed your taxes to the federal income. Famously, the U.S. is one of only two countries that taxes its citizens, not its residents.

The only other country that does this? The tiny impoverished East African country of Eritrea, which levies a 2% tax on its citizens living abroad. That's still kind of paltry compared to the 34.9% or so that the U.S. taxes.

BUT. You are allowed to exempt foreign income within certain specifications when filing your U.S. taxes! For example, having earned the near-totality of my 2015 income in the UK, I have already paid UK taxes on this income. Up to 40% tax on some of it, in fact. I should therefore be able to exclude this income when filing my U.S. taxes, rather than pay another 35% tax on it.

(Which, simple math would tell us that'd add up to a 75% tax rate while living in one of the world's most expensive cities. Hello, living under a bridge!)

But ohhhhhhh, if only it were this easy.

I tried. I tried to file by today's deadline. I had all my ducks lined up in a row, my paperwork, my pristine TurboTax software, my devotional silver lining loyalty to Uncle Sam ("I want YOU to pay your taxes: do not question the system!")

And I was, in a word, denied. It turns out that in order to qualify for a so-called "foreign-earned income exclusion," you have to pass one of two tests: the Bona Fide Test and/or the Physical Presence Test. 

The BFT means you have to be a "bona fide resident" of another country for an entire tax year; i.e., from January 1-December 31, 2015. I moved to London in July 2015, so clearly I don't qualify.

The PPT means you have to have spent at least 330 days in a 12-month period (not necessarily a calendar year) outside the U.S. As of today - and accounting for a 7-day trip back to the U.S. over last Thanksgiving - I have spent 273 days in the past 12 months outside the U.S. So I don't qualify here either (yet).

What does this mean? Well, as near as I can tell, it means I have two choices: a) file now and pay U.S. taxes on all my 2015 foreign-earned income (which, again, I've already paid tax on); or b) wait until I meet the 330-day threshold.

Now, in theory this is not a problem, because the U.S. grants an automatic two-month extension - until June 15th - to all citizens living abroad. And I will be meeting the 330-day requirement on June 12th. 

Why am I writing an incredibly long and boring post about TAXES for something that's supposed to  be a Happy Moment? Because while doing a spot of research to brainstorm for possible blog post ideas, I found a list of countries that don't tax local or foreign income.

So in planning my next move, I'm targeting Vanuatu. Or Somalia. Or Kuwait. Or the Bahamas. I'm going to sit on the beach and drink out of coconuts and light my fancy cigars with $100 bills that nobody will take away from me.

And until then, June 12th it is.

Love,
Joëlle