Keeping Your U.S. Home While Living Abroad

Choosing to live abroad for any U.S. citizen is a fun and exciting venture for anyone. The reasons can be endless, some choose to work abroad while others may be looking for a change in pace. In the midst of these lifestyle choices, a question that you should ask when living abroad is how you can maintain your U.S. home while living abroad. If you choose to do so, it is important to be aware of all the tax implications and consequences. Doing so, will help realize your expectations for upcoming tax seasons.

Having A Vacant U.S. Home

Renting out your home is an added responsibility that have further tax implications if you do decide to. However, if you decide to keep your home in the United States and don’t rent it out then you typically won’t have an added tax responsibility. If you have already applied, you should see the status of your application for the Foreign Earned Income Exclusion (FEIE). This scenario depends on how you qualify. Further, if you use the Physical Presence Test, there will likely be no impact on your tax return.

In another scenario, if you use the Bona Fide Residence test, you might be asked to provide a reason for retaining your US property. The Bona Fide Residence Test helps determine if as an American citizen, you are a resident of a foreign country. Americans must reach certain qualifications to be considered expats if they are looking for certain deductibles and tax benefits.

Renting Out Your U.S. Home

If you do decide to rent out your home it can be a profitable opportunity so that you can cover the maintenance of your home while you live overseas. Although this may be more profitable in the end, it may also bring its own challenges. The amount of days in the calendar year that your property is rented largely effects the tax implications

Here are a few scenarios that you may experience when renting out your US home:

  •   Spending no time in your U.S. home during the calendar year
    • If your property is entirely considered rental then your must report all of the income generated by the property. Expenses and repairs will be deductible on your US expat return
  • Your U.S. home is rented out more than fifteen days and you spend less than fourteen days in the property
    • The IRS will classify your home as a rental property and a vacation home. This means your indirect expenses will be pro-rated based on the number of days the home was rented out. Indirect expenses include mortgage interest, real estate taxes, depreciation. However expenses such as management fees and expenses, advertising will be 100% deductible.
  • If you spend more than fourteen days in US home as well as rent out more than fifteen days in the calendar year
    • The IRS will classify it as a faction home and a secondary property. You are required to report rental income and deductible expenses will be pro rated to the number days it was rented.
  • You spend more than fifteen days in the property but rent it out fewer than fifteen days.
    • There is no need to report rental income on your US expat tex return.

Get Help Today

Learning what applies to your situation now can help you in the long run. The situations we briefly went over should give you a good idea of how to proceed on your US expat tax return. However, Our team at Ameritax are licensed professionals who are dedicated in helping you with your specific needs. Taxes can be overwhelming but with our help we are confident that we can get you the best results for you! Get help now!