American Tax Return: Live Abroad and Relocation Costs to the USA

By ZM Ishmurzina

American expats who live abroad might decide to come back to the USA. Earlier we discussed that Americans can deduct moving expenses if they move for a new job and meet two other tests. However, some groups of American expatriates can deduct relocation costs on American tax returns when they move back to the USA.

This is an email from one of our clients. “My husband and I currently live abroad in Spain. We want to retire in California. Can we deduct relocation costs on American tax returns when we return to the USA?”

Let’s review three groups of American expats who are eligible to claim moving expenses on American tax returns even if their move is not related to work.

Members of Armed Forces

Members of Armed Forces on active duty can deduct unreimbursed moving expenses if their move is due to a permanent change of station. There is no requirement to meet the distance and time tests to deduct relocation costs.

Permanent change of station is the following:

  • Move from home to the first post of duty
  • Move from one permanent post of duty to another
  • Move from the last post of duty to home or another point in the USA

Retirees

Retirees who live abroad can deduct relocation costs for a move to a new home in the USA. Retirees must work and live abroad as well as they have to permanently retire. Whether an American expatriate retired permanently is determined based upon his/her age, health and the typical retirement age for people in the same line of work.

Survivors

Survivors of decedents who were working abroad can deduct relocation costs for a move to the USA. A survivor is a spouse or dependent of a person who worked overseas at the time of death. In order to deduct relocation costs two requirement must be met:

  • Move must be within 6 months after the decedent’s death.
  • Move must be from a home outside of the USA to a home in the USA.
  • Survivors must live abroad with a decedent.

This is a short summary of key groups of American expatriates who can deduct relocation costs on American tax returns.

Americans who live abroad have to review the IRS rules and regulations for US expats. It is advisable to contact an expatriate tax CPA that provides international tax services. International tax experts at Artio Partners are here to help you.