Deductions: US Expat Taxation
When you are an American citizen but residing in a foreign country there are certain deductions that you can make from your income when filing US income tax return. However, any amount that has been claimed as a part of the exclusion like foreign housing expense cannot be claimed as a deduction. Even any item that is part of your household expense or foreign income exclusion cannot be a deduction. The deductions that can be made from your taxable income while you are an expat are:
- Donation to US charities: All donations made to US charities can be deducted. Any donation made to the charities of your resident country is not included. Donations to charitable organization which obey certain criteria in Mexico, Canada and Israel can be deducted if you have a source of income also from these countries
- Real property Taxes: First of all personal property is not included in this. Real property refers to land or building though which you earn an income like a factory, warehouse etc. and pay required income tax to the foreign country in which you reside. This tax can be a deduction.
- Spouse: An exemption can be claimed if your spouse is also living with you in a foreign country. The condition is that the spouse should be a dependent, not have any income in that country and should not be dependent on any US taxpayer.
- Dependents: You can claim tax exemption for children or any other dependents that you may have. The criteria for qualifying as a dependent are that the person should be a US citizen or US resident alien or resident of Mexico/Canada. The person should also have a US social security number and a Taxpayer Identification Number.
- IRA: Any contribution made to IRA subject to a maximum of $5000 and in case of senior citizens o $6000 can be claimed as a deduction.
- Other items which are not sources of income like alimony payments, medical expenses, mortgage interests, retirement contributions, personal exemptions, taxes on real estate of you residence etc. can also be claimed as deductions.