Best tax software for American expats
Living abroad is exciting, but U.S. taxes can still follow you! As an American, you’re required to file a tax return no matter where you live, but it doesn’t have to be hard.
Managing financial accounts is crucial for expats, as the IRS can track these accounts through the Foreign Account Tax Compliance Act (FATCA). Ensuring compliance with U.S. tax obligations is essential to avoid potential penalties for not reporting foreign financial accounts.
This guide will help you find the best tax software for expats, highlighting essential features and tips to save on federal and state taxes while abroad. By the end, you’ll feel ready to confidently handle your U.S. taxes—from anywhere in the world.
Let’s get started!
Federal taxes for expats
Even while living abroad, U.S. citizens are required to file a federal tax return with the IRS. Federal taxes for expats can be intricate, but using tax software designed specifically for expats can simplify the process.
These specialized programs help you navigate the complexities of expat taxes, including the Foreign Earned Income Exclusion (FEIE) and the Foreign Tax Credit (FTC).
By leveraging these tools, you can ensure compliance and potentially reduce your overall tax liability.
Key features to consider in tax software for expats
Finding the right tax software is about more than just convenience—it’s about choosing one that meets your specific needs as an expat.
Tax authorities, such as the IRS, are crucial in monitoring compliance with expat tax regulations through mechanisms like the Foreign Account Tax Compliance Act (FATCA) and international cooperation to exchange information.
Here are a few key features to keep in mind:
Foreign Income and Tax Credit options
Look for software that supports expat-specific options like the Foreign Earned Income Exclusion (FEIE) and the Foreign Tax Credit (FTC). These credits and exclusions can help reduce or even eliminate your U.S. tax liability on foreign income.
FBAR and FATCA reporting
If you have foreign financial accounts, you’ll likely need to report them to the U.S. Treasury Department by filing the Foreign Bank Account Report (FBAR) or report under FATCA. The best software will have these forms built-in so you don’t miss any critical reporting requirements.
State tax filing options
If you still have ties to a U.S. state, you might need to file state taxes. Some software includes options to handle specific state requirements, saving you from any surprises.
Ease of use and customer support
A user-friendly platform and solid customer support make a huge difference. Look for software that’s easy to navigate and has expat-specific support if you need extra help.
Cost and affordability
Different software options come at different price points. Compare costs to see what fits your budget—some platforms even offer basic features for free!
Integrations and automation
Features like international bank integrations, automatic currency conversion, and multi-currency support can make filing a lot easier for expats.
3 best tax software for American expats
Navigating taxes as an expat is much easier with software designed for international requirements. Here’s a look at three leading options for U.S. expats, covering their strengths, weaknesses, and pricing to help you make the best choice.
Expatfile
Expatfile specializes in U.S. tax software for Americans living abroad, offering a simple, intuitive platform ideal for users with standard expat needs. Known for its user-friendly setup and real-time feedback, Expatfile makes it easy to e-file both federal taxes and FBAR, meeting essential expat filing requirements.
Key features
- Supports Foreign Earned Income Exclusion (FEIE) and Foreign Tax Credit (FTC).
- Automatic FBAR Filing: Easily file your Foreign Bank Account Report directly with FinCEN.
- Instant IRS feedback and approval status for peace of mind.
Pricing
- Standard Plan: $119 per return, covering basic federal filing with FBAR support.
- Premier Plan: $159 per return, designed for self-employed expats or those with refundable credits like the Child Tax Credit.
- Investor Plan: $199 per return, which includes features for those with investment income.
- Unlimited Plan: $499 per return, offering unlimited support and dedicated tax expert assistance.
Pros
Affordable, straightforward, and suitable for straightforward expat needs.
Cons
Doesn’t support state tax filing, so it may not be ideal for expats with ties to U.S. states that require a separate state tax return.
H&R Block Expat Tax Services
As a well-known tax provider, H&R Block offers expat services with a personal touch, allowing users to work directly with tax professionals familiar with expat tax laws. It’s suited for expats with more complex financial situations or those who want hands-on support.
Expats living in a foreign country often face complexities such as the Foreign Earned Income Exclusion (FEIE) and the Foreign Tax Credit (FTC). H&R Block Expat Tax Services can help navigate these issues, ensuring compliance and optimizing tax credits.
Key features
- Access to expat-specific tax professionals for personalized support.
- Full FBAR and FATCA compliance for those with foreign bank accounts and assets.
- Additional guidance on tax treaty benefits for residents in countries with U.S. treaties.
Pricing
- Basic Filing: Starts around $199, making it more affordable for simple expat returns.
- Comprehensive Services: For more complex returns, including investments and multiple income sources, costs can reach $300 to $500 or more.
Pros
Great for complex filings, provides one-on-one guidance, and includes both FBAR and FATCA filing.
Cons
More expensive than DIY options, with prices increasing based on complexity.
MyExpatTaxes
MyExpatTaxes is a budget-friendly, easy-to-use option for expats with relatively straightforward tax needs. It’s known for its transparent pricing, highly rated user interface, and support for expat-specific forms like FEIE and FTC.
Filing tax returns accurately and in a timely manner is crucial, and MyExpatTaxes supports this process efficiently.
Key features
- Support for FEIE and FTC, covering essential expat deductions and credits.
- Multi-currency support for expats with income in multiple currencies.
- User-friendly, with simple questions guiding users through the filing process.
Pricing
Basic Plan: $149 per return, covering most expat filing needs, including FBAR and state filing support (though limited to federal filing only).
Pros
Cost-effective, intuitive design, and well-suited for basic expat needs.
Cons
Limited support for more complex cases, such as those involving business income or substantial investment portfolios.
How to save on taxes as an American expat
Saving on taxes as an expat often comes down to using key tax credits, exclusions, and smart strategies for managing state residency. Here’s how:
State taxes
Moving domicile to a no-tax state
Shifting your state residency to a tax-free state like Florida, Texas, or Nevada can eliminate state income taxes. SavvyNomad, for instance, offers services to help expats and nomads establish domicile in states with no income tax, reducing overall tax burdens.
Cutting ties to high-tax states
To avoid state tax obligations, expats should carefully manage any lingering connections, such as property ownership or driver’s licenses, in high-tax states.
Taking advantage of these strategies and considering services like SavvyNomad can significantly lower your tax burden while living abroad.
Federal taxes
Foreign Earned Income Exclusion (FEIE)
The FEIE lets you exclude a certain amount of foreign income, which can reduce your U.S. tax liability. To qualify, you’ll need to meet residency or physical presence requirements.
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Foreign Tax Credit (FTC)
This provides a dollar-for-dollar tax credit for foreign taxes paid, helping offset U.S. taxes on foreign income.
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