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I'm looking for some insight on how a US resident living in Spain should approach their US Federal and State taxes.
My son has lived in Michigan for a couple of years and has worked for the same employer. This year, he moved to Spain to pursue a masters degree. He was able to change his work status from full time to part time and is able to work online for his same employer.
So from January thru September 2018, he worked and lived full time in Michigan. From September through December, he has lived in Spain and continued working for his Michigan employer online and part time. It seems to me that he is an expat, but he doesn't get any income from foreign sources. He's living off of his savings and part time salary. His money is still in his US checking and savings accounts.
He's single, doesn't own a car or home and is still covered under my medical insurance. It's not a job requirement for him to be in Spain. He could live anywhere and work remotely.
Normally it would seem straightforward, he has US/Michigan income and takes the standard deduction.
Are his taxes harder than that?
How does the fact that he is temporarily (for the duration of his degree program) overseas affect his taxes?
He'll probably go to a tax firm, but I thought that I would ask how different his taxes will be this year.
US is one of the few countries in the world which taxes on world wide income with some leeway allowed when living in certain countries which signed agreements with US( google double taxation agreement countries)- they allow you to get credit for taxes paid to those countries...
So it is very simple for your son- he has to file income tax on all his income.
Even if he spend all year in Spain this year and makes money only in Spain- he still has to file US income tax
I found you a treaty with Spain for IRS- just read and follow instructions carefully- if your son needs it for this year ...
And as your son was in US for more than 183 days- he is still considered residing here- so any way you look at it- your son should file as usual, as if he was not in Spain.
The reason Tina Turner and Madonna renounced their US citizenship- US income tax they had to pay even though they lived and made money abroad...
I'm looking for some insight on how a US resident living in Spain should approach their US Federal and State taxes.
My son has lived in Michigan for a couple of years and has worked for the same employer. This year, he moved to Spain to pursue a masters degree. He was able to change his work status from full time to part time and is able to work online for his same employer.
So from January thru September 2018, he worked and lived full time in Michigan. From September through December, he has lived in Spain and continued working for his Michigan employer online and part time. It seems to me that he is an expat, but he doesn't get any income from foreign sources. He's living off of his savings and part time salary. His money is still in his US checking and savings accounts.
He's single, doesn't own a car or home and is still covered under my medical insurance. It's not a job requirement for him to be in Spain. He could live anywhere and work remotely.
Normally it would seem straightforward, he has US/Michigan income and takes the standard deduction.
Are his taxes harder than that?
How does the fact that he is temporarily (for the duration of his degree program) overseas affect his taxes?
He'll probably go to a tax firm, but I thought that I would ask how different his taxes will be this year.
Thanks.
It's not really that complicated from the US perspective. If he has dual citizenship in Spain or permanent resident status, he could qualify as a bona fide resident. If he doesn't have citizenship in Spain and is just on a temporary visa, he doesn't. That means physical presence. To meet the physical presence test you have to be outside the US for 330 days in a 12-month period.
What he should do depends on whether or not he will remain outside the US for 330 days in a 12-month period. Having moved there in September, he obviously hasn't yet. If he intends to stay in Spain in 2019, however, and doesn't spend more than 35 days in the US in a 12-month period, he will. That can be handled two ways. He can either file a return by April 15th and then amend later on or, the much better option, file an extension and file the return in October.
Simple example is he left September 1st and did not come back at all. By October 1st, 2019, he's now been out of the country for over 330 days and meets the requirement. The income he earned from September 2nd (he was still in the US on the 1st) through December 31st of 2018 is now exempted. You report the income as normal and claim the foreign income exclusion. It doesn't matter that he's working for the same company remotely. On the other hand if he left in September and then returns the US for two months during the summer when there is a break in the master's program, he won't qualify.
State return will vary. Tax prep software will handle it though.
I have no idea how Spain works or what his legal status in Spain even is. If he's on a student visa and doesn't have a legal right to work in Spain, the best answer is probably to just pretend he's not earning any income. At any rate, when I was in Prague for four months it's what I did. As far as they were concerned I was there on a tourist visa. Majority of my income was coming from working as a contractor with a US based company and direct deposited into a US bank account and I paid the wire and foreign transaction fees to move it to HSBC locally. Fortunately, I wasn't paycheck to paycheck as that gets expensive. I also did some under the table work for local companies. In Prague they just ignored it. It's probably harder in Spain but as long as it's a US company going to a US bank, they're not going to know.
Prague was very cash based at the time. Nowadays, it's probably easier to just use a US credit card with no foreign transaction fees but that's not a tax issue.
Last edited by Malloric; 03-04-2019 at 07:42 PM..
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