Green card holders find green card tax requirements quite confusing. Many of them believe that they are not required to file a US expatriate tax return when they move overseas. Unfortunately, this assumption is far from being correct.
Let’s review green card tax issues in more details.
Green Card Tax Requirements and Expats
- First, all green card holders or permanent residents are automatically considered US tax residents after they get a green card. Permanent residents are taxed as US citizens on a worldwide income. The fact that a green card holder lives in his home country doesn’t exempt him/her from US expat tax filing requirements.
- Second, foreign nationals with a green card are required to file a US tax form 1040 each year if they meet the requirements.
- Third, green card holders can claim the same exemptions, deductions and credits as US citizens.
- Fourth, the due date to file a green card tax return is April 15. However, permanent residents can get an automatic extension to file a US expatriate tax return until June 15 if they live outside of the United States and Puerto Rico on April 15. They are also eligible for an additional extension until October 15 if they timely file the form 4868 by June 15 (for green card holders living abroad).
- Fifth, green card holders can avoid double taxation issues by utilizing certain provisions under Internal Revenue Code section 911.
- Foreign Tax Credit. Permanent residents can claim a foreign tax credit on green card tax return for foreign income taxes paid.
- Foreign Earned Income Exclusion. Green card holders can exclude up to $95,100 for 2012 on US expatriate tax return if they meet either bona fide or physical presence test.
- Foreign Housing Exclusion. Additionally, foreign nationals with a green card can exclude some foreign housing expenses like rent, utilities etc.
- Sixth, green card holders with foreign financial accounts might be required to file the FBAR. FATCA is another form that was introduced in 2011.
- Finally, foreign nationals with a green card might face severe consequences if they don’t file a US expatriate tax return. Failure to file a US tax return can jeopardize an opportunity to receive a US citizenship. Also, a green card may be revoked.
Foreign nationals who need help with green card tax issues must contact an expatriate tax professional that provides international tax services for foreign nationals, dual citizens and Americans living abroad. International tax experts at Artio Partners are here to help you.