US taxpayers are taxed on their world-wide income and, with the few exceptions discussed below, there is no difference between filing a tax return in the US or abroad.  A 1040 must be filed, and all other forms and schedules as in the US. 

The most significance difference between taxpayers who live in the US and those who live abroad, is that taxpayers abroad have the possibility, for tax year 2023, of exempting their income up to $120,000 a year and qualified housing expenses over $19,200 a year with a maximum of $36,000 unless living in a high cost locality.  This is obtained by filling out Form 2555, which I have devoted a separate page to. Here are some of the other differences.

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The UN neither reports income to the IRS nor does it withhold any taxes.  In some cases this can result in a staff member having to pay a penalty for under-payment of estimated taxes.  The staff member should make sure that proper estimated taxes are paid.

 

 

Normally if you are married you must file either Married Filing Jointly or Married Filing Separately.  For staff members with a non-resident alien spouse, filing jointly may result in higher taxes because the worldwide income of the spouse must be included.  As an alternative to filing Married Filing Separately the IRS does allow a taxpayer who is married to a non-resident alien to file as Head of Household as long as the taxpayer qualifies.  To qualify as Head of Household you must have a dependant other than your non-resident alien spouse, a parent or child for example, but others do qualify.  If you are not sure if you qualify as Head of Household more information is given on page 51 of Publication 54.

       

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Many credits and deductions, such as the Child Tax Credit, education credits and deductions, contributions to IRA and Roth-IRA, etc. have income phase-out amounts. This means if income is above a certain amount this credit or deduction can be reduced or eliminated.  Normally this is based on the AGI (Adjusted Gross Income) which includes Form 2555 deductions.  In many cases the Form 2555 deductions have to be added back to the AGI, which in some cases means reducing or losing the credit or deduction.  Read instructions carefully to see if another calculation has to be used when using Form 2555 or 2555EZ.  The Earned Income Credit cannot be taken if Form 2555 or 2555EZ is used.

      

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If you pay taxes on foreign income (not VAT) you may qualify for a credit.  See instruction for Line 47 of the 1040, or Form 1116.

    

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State and local general sales tax to be deducted on Schedule A. This, however, only applies to sales tax paid in the U.S., you cannot deduct VAT or MWST paid in a foreign country.

     

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In most cases charitable deductions can only be made to a US organization, or the US branch of a non-US based organization.  If you are not sure check with your church or organization, or IRS Publication 78 which has a list of most qualified organizations. ​