As an American expat, living in the Kingdom of Saudi Arabia has great many perks, but it also comes with its own set of challenges! Why we are saying this? Well, that’s because the United States has laid down many tax laws, which directly or indirectly affect the American expats. These laws can prove quite confusing to people who plan on navigating the tax hurdle themselves.
At Expat Global Tax, we have been in business of helping people with American taxes in USA, and have pieced together some of the tax info for your kind perusal.
The US handles taxes differently! How so? Well, the country considers the worldwide income of its citizens as taxable, and that’s where it gets tricky. So, as an American citizen, if you reside in Saudi Arabia, you should know that your income – no matter where it is earned – all falls under United State’s tax umbrella!
Here’s a brief idea on who should file a tax return and how to pay USA tax from Saudi Arabia.
Wondering what happens when you have a non-working spouse? Well, if you are married to someone who isn’t a US citizen and remains at home taking care of the children, you will still need to file a US tax return.
If you are an American expat staying in Saudi Arabia, deciding on your filing status can seem a little daunting. This can be even more challenging if you have multiple sources of income. This is where pros come in! We are a US CPA in Saudi Arabia with profound knowledge in all things FATCA filing USA and modern IRS tax laws. Our team of experts will go through your financials and tell you exactly what you need to do.
Do self-employed American expats also need to file US taxes? Well, the answer is a resounding Yes! If you earn $400 in net income, doesn’t matter from which country you earn it, you’ll need to file US taxes.
This is for US expats whose bank accounts housed a total of more than $10,000 at any time during the year. You will have to file an FBAR - which stands for Foreign Bank and Financial Accounts. According to the IRS, this has been done to keep things transparent and stop people from evading taxes.
It’s also time we told you about Form 8938. It is used to report certain financial assets, should they ever go over specific limits. As a US tax firm, we help our clients in filing form 8938 - based on his or her residency and filing status.
For singles or married people who are staying in the US and filing separately, you must fill in Form 8938 if your assets exceed $50,000 on the last day of the tax year. You will have to do so even if your assets exceed $75,000 at any point during the year. That said, for married people filing together, the threshold is set at $100,000 and $150,000, respectively.
As for expats, the thresholds are higher! Singles or those married but filing separately must fill out the Form 8938 if his or her assets exceed $200,000 on the last day of the tax year. The same rules applies if their assets cross $300,000 at any point during the year. However, for joint filers, the threshold is set at $400,000 and $600,000, respectively.
Well, the key to knowing what gets counted for tax is to answer one simple question! How long have you been outside the United States? If you have spent 330 days or more out of a 12-month period in Saudi Arabia or in some other country, you will have to pay taxes on your income, no matter where you’ve earned it at.
In 2023, the foreign earned income exclusion allowed people to exclude up to $120,000 of their income from US taxes. So, if someone earned made around $60,000 while their stay in Saudi Arabia, he or she could rest easy knowing they do not have to pay any tax to the US.
At Expat Global Tax, we help streamline filing for American expats. Why do you need us? Well, that’s because the foreign earned income exclusion and other specifics of US taxes don’t always remain the same. In other words, these aren’t set in stone. So, the foreign earned income exclusion keeps inching up a bit each year to keep up with inflation. This allows people to exclude a bit more income each year. However, you can’t do that all by yourself - and need professionals to help you with the specifics.
But what happens when you earn more than the foreign earned income exclusion level? If you’re doing too well, and earn probably about $150,000, you will have to exclude $120,000, and pay tax on the $30,000. However, being an expert US CPA in Saudi Arabia, we help individuals show the extra amount as rent, utilities, and even as Wi-Fi bills, so as to lower your taxable income. Connect with our experts at Expat Global Tax to find out how we can help with filing American taxes in KSA.
As a leading American CPA in Saudi Arabia, we at Expat Global Tax, we often come across individuals who are confused between the self-employment tax rules and the federal tax. Well, let’s clear that up for you! To put it simply, the federal tax is all about how much you earn and what tax bracket you belong in. As for the self-employment tax, it is a set percentage of your net income.
To put it all into perspective, the federal tax is progressive. So, the more you earn, the higher will be the amount that you will have to pay as taxes. Back in 2023, the lowest tax bracket started at 10% and went up to 37%.
On the other hand, self-employment tax is deducted at a flat flat rate of 15.3% on people’s net self-employment income. This comprises of two parts - one of which is 12.4% and goes towards Social Security, while the other 2.9% is for Medicare.
FBAR stands for Foreign Bank and Financial Accounts Reporting. We have already mentioned that if your foreign bank account hits more than $10,000 in a year, you’ve got to file an FBAR. To put it into perspective, suppose you have two bank accounts in Saudi Arabia - one where you have $5,000 and another, where you have $6,000. Since this crosses the $10,000 threshold, our team will help you file the FBAR.
However, FBAR is not for taxation. It is just to let the US government know about the foreign bank accounts that you hold. The US won’t tax them directly. Taxes will only come into play if you incur income on these, such as interests. In that case, you will have to report it in Form 1040.
As for FATCA, it stands for Foreign Account Tax Compliance Act. It is an agreement between the US and the foreign banks and is tied to Form 8938, which we’ve discussed above. For more info on this, feel free to get in touch with our team at Expat Global Tax - an American CPA in Saudi Arabia.
Saudi Arabia doesn’t levy any capital gains tax on individuals buying or selling property. But, US citizens staying in the US must report any capital gains to the IRS. In fact, they can be subject to US capital gains tax.
As a US citizen, you must report foreign rental income and adhere to all filing requirements, including filling out Form 8858.
To help you with the basics, principal residence includes any property you’ve lived in as your main home for at least two out of the five years preceding the sale. This is eligible for a notable exclusion on capital gains. For individuals, this exclusion threshold is set at$250,000, and for married couples filing jointly, the same goes up to$500,000.
As for US tax filing from Saudi Arabia in case of a rental property, no such exclusion applies.
Making improvements to your home can be factored into the property’s cost, thus lowering the taxable gain. However, for this, it is essential for people to document all expenses - especially since, not all expenses/ costs qualify.
All this can be quite confusing for people, and so, it is best for you to reach out to our experts. We are a local US CPA and will handle all things pertaining to US expat taxes on your behalf. Hire our team and rest makes sure that your taxes are done right - meeting compliance all through.
Handling US taxes when staying in Saudi Arabia can be tough. Luckily, you have us by your side! At Expat Global Tax, we specialize in simplifying tax obligations for dual citizens American Saudi Arabia - making sure you remain compliant with US tax laws and your tax burden goes down.
From FATCA filing USA to FBAR reporting and other complex dual citizenship treaties, we navigate it all, so you don’t have to. Our team understands the unique challenges US expats face and offers tailored solutions accordingly.
All us to handle the paperwork, while you focus on your life abroad!
For your Get Free Quote on any tax related matters, please contact us via the phone number or email listed below or request a call back using the forum.
