US citizens who choose to expatriate to Hong Kong may get attracted by the country’s charm and career opportunities. But with the country’s beauty and opportunities, one should also not overlook the tax obligations that come parallel with the arrival of a US expat. And the worse is, if you fail to file as defined in the law, it can result in hefty penalties or even legal repercussions. To help you, here we have created this guide of US expat tax consultants in Hong Kong to explain the taxation process for Americans living in Hong Kong.
Living in Hong Kong Impacts US Taxes
As an expat living in Hong Kong, you are required to file US expat tax to stay protected from the IRS. For the preparation of the annual tax, you need to include worldwide income on your US expat tax return, including income that is subject to tax in Hong Kong.
Exemptions Available For US Expat Taxes In Hong Kong
By seeking the professional US tax service for Americans in Hong Kong you can easily reduce your US taxes by claiming deductions and tax credits to the income earned in Hong Kong. The following exemptions may help to relieve some of the double taxations that in general result from having to pay tax from two countries.
- Foreign Earned Income Exclusion (FEIE) – This exclusion allows you to exclude your wages from US taxes. However, this specific exclusion is eligible only for those expats who meet residency status.
- Foreign Tax Credit (FTC) – This exclusion enables you to claim a credit for the income taxes paid to the government.
- Foreign Housing Exclusion – It allows additional exclusions to cover household exclusions while living in Hong Kong.
Determining residency status in Hong Kong
You become a Hong Kong resident if you spend at least 183 days there during the tax year. Or, the other criteria is if you reside at least 280 days in the current taxation year as well as the preceding year.
Get The Opportunity To Amend The Previous US Tax Return If There’s Any Mistake
Mistakes do happen, but with the right guidance of US expat tax consultants, you can also rectify the mistake within time. By letting a tax preparer rectify the mistake before the IRS identifies the mistake is the best decision to be saved from the hefty penalty of the IRS.
Meeting your tax obligation as a US expat is no easy task. You will need to overcome several complications after setting up the business or work. Thus, having expert guidance in the form of a professional US expat tax specialist in Hong Kong is an ideal decision.