Foreign Tax Credit – John Chung, U.S. Attorney, CPA, takes you through the Foreign Tax Credit in detail.

The U.S. taxes based on citizenship rather than residence. This means that American citizens and green card holders that are living outside the U.S. (aka: American Expats) are required to file a US federal tax return, wherever in the world they live and wherever their income originated, and pay tax on such worldwide income. But don’t be too disappointed yet, as there are some very strong special tax rules that American Expats can utilize to minimize their tax liabilities;

In this Part I video, we discuss (1)Foreign Tax Credit, (2)Foreign Earned Income Exclusion, Foreign Housing Exclusion/Deduction, and (3)Tiebreaker rule under U.S. income tax treaty.

(1) This video, The Foreign Tax Credit is the primary IRS provision that prevents US expats from having to pay tax on the same income twice. You basically can use the foreign tax paid to other countries to offset U.S. tax liabilities.
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(2) The Foreign Earned Income Exclusion, or FEIE, allows US expats to exclude up to around $100,000 of their foreign earned income from US tax computation.
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(3) Tiebreaker rule is available if (1) you are a green card holder, (2) a resident of another country which has a income tax treaty with the U.S., and (3) the treaty has a provision called Tiebreaker rule, which allows you to claim that you are a resident of the foreign country only.
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In Part II, we will discuss foreign financial reporting rule (FBAR, FATCA) that requires Americans to report their foreign financial assets if the total value is over certain amounts.

In Part III, we will discuss an amnesty program (Streamlined Procedure) as a way for Americans who are not current with their US tax filing obligations to become current without facing penalties nor any undue scrutiny by the IRS.

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DISCLAIMER: The information in this video should not be considered tax, financial, investment, or any kind of professional advice. Only a professional diagnosis of your specific situation can determine which strategies are appropriate for your needs.

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