More Tax Burden for Americans Citizens Abroad

Last updated on December 10, 2022

Americans who live overseas already face the extra challenges of more paperwork and tax reporting requirements entailed in living abroad. Now, the American Citizens Abroad (ACA) organization has discovered that many Americans living abroad will be subject to double taxation due to certain clauses of the Affordable Care Act.

Americans living overseas whose income reaches a particular threshold will need to pay Net Investment Income Tax (NIIT) apart from other taxes already charged on income. Only countries with which the U.S. has Totalization Agreements will be spared from the double tax.

The Foregin Account Tax Compliance Act (FATCA) has already made taxation difficult for those living overseas. With strict filing and reporting requirements for foreign financial institutions (FFIs), many FFIs are reluctant to do business with Americans. This has increased the tax troubles of Americans working overseas.

Totalization Agreements are agreements the U.S. has made with foreign nations to prevent double taxation. At present, the U.S. has Totalization Agreements with 24 countries. It is important to note that American taxpayers living abroad do not receive the benefits of the Affordable Care Act. The American Citizens Abroad (ACA) has written to the IRS and other government departments about the double taxation.

With many new changes in the tax rules for those living overseas, American taxpayers living abroad have the choice of either renouncing their American citizenship or complying with the new laws.