2018 Tax Guide for Americans Abroad & Non-Resident Aliens
Preface
Filing Income Tax Returns & Information Returns
Taxation of Non-Resident Aliens
Penalty under the Affordable Care Act (a.k.a. ObamaCare)
Election to include your Foreign Spouse in your Return
Foreign Earned Income Exclusion and Foreign Tax Credit
Child Tax Credit and Other Credits
Self-Employment Taxes
Stock Options
Foreign Passive Investment Companies (PFICs)
State & Local Tax Issues
Tax Treaties
Special Rules for Taxpayers wishing to Renounce their US Citizenship
Repatriation Tax & GILTI on US-owned Foreign Corporations
Summary of Information Returns
List of Totalization Agreements
Filing Threshold Table
Individual Tax Rate Tables
Filing Deadlines
ARTICLES ON SPECIAL TAX TOPICS
I haven’t filed US Tax Returns: Can I still get back to compliance and what will happen if I don’t file?
Israeli Financial Instruments & Children’s Savings Accounts
Is it worth to be self-employed in Israel?
Tax Implications of Renouncing your US Citizenship
Tax Implications for NRAs investing in US Real Estate
Choice of Entity for Foreign Businesses Operating in the US
The information contained in this guide is not intended to constitute legal or tax advice and cannot be relied as such. Neither transmission nor receipt of this guide will create an accountant-client relationship. The advice and strategies herein may not be suitable for your situation. You should consult with a tax professional where appropriate. The author shall not be liable for any loss of property or any commercial damage, including but not limited to special, incidental, consequential or other damages.
PREFACE
This Tax Guide summarizes some of the most recurrent topics affecting Americans abroad. Unlike most western countries, the US has Citizenship-Based Taxation (as opposed to Residence-Based Taxation). As a result of this, US citizens residing overseas are required to report and pay taxes on their worldwide income to the IRS even if they did not reside in the US. This puts Americans abroad in the unique position of having to comply with two tax systems and file returns in two countries.
With the implementation of FATCA agreements in several countries, the 2018 tax season presents unique tax planning challenges, making the the need for qualified tax advice all the more essential. FATCA requires foreign financial institutions to report the balances and certain transactions of US account holders to the US government, or otherwise be subject to 30 percent withholding, and imposes additional reporting requirements on US taxpayers. Taxpayers who need to get back into compliance should consult a tax professional about the options available (see discussion on the Options to get back to Compliance with Your US Tax Obligations).
In addition, Trump’s tax reform has modified many tax rules affecting American expats. These changes include a reduction of tax rates, revocation of the individual mandate penalty, an increase to the child tax credit, repatriation taxes on foreign corporations, and an increase to the Gift & Estate tax exemption to $11.2 million. Under the new law, the personal exemption is suspended, but the standard deduction is increased from $6,350 to $12,000 for single individuals and from $12,700 to $24,000 for married individuals filings jointly.
As always, I cannot overemphasize the importance of getting professional advice. The variables are endless depending on the situation and they go beyond the scope of this Guide. For more information, call us now for a free 15 minute consultation (972-55-6682243 in Israel or 1-954-603-8958 in the US) or e-mail us at nathan@savranskypartners.com.
ABOUT THE FIRM
Savransky Partners LLC is an international tax consulting firm specializing in the tax needs of Americans abroad and foreign investors in the US. The firm offers a wide range of services, including tax preparation, US & International tax planning, negotiations with the IRS and state tax agencies, comptrollership services, and FIN48.
Filing Income Tax Returns & Information Returns
US citizens and resident aliens must file income tax returns reporting their worldwide income for any year in which their gross income reaches certain filing thresholds (see Filing Threshold Table). This requirement also applies to U.S. taxpayers residing overseas. If you fail to file a return and a tax is due, failure-to-file and failure-to-pay penalties may accrue on your balance due up to 25 percent each. No penalties are imposed if no tax is due.
In addition to income tax returns, you may also be required to file other information returns disclosing information on your foreign bank accounts and foreign entities owned by you. At the end of this Guide, we present a summary of the information returns you may be required to file and the penalties that may apply for failure to timely file these forms.
Generally, you are considered a resident alien for tax purposes if you meet either the green card test or the substantial presence test. The green card test is met when a green card is issued by the US Citizenship and Immigration Services. The substantial presence test is met if you were physically present in the U.S. on at least 31 days during the current tax year, and 183 days during the last 3 years based on a special computation (see IRS Publication 519).
Taxation of Non-Resident Aliens
If you are not a US citizen and do not meet the green card test or the substantial presence test, you will be considered a non-resident alien and taxed only on US source income. Payments to non-resident aliens of fixed, determinable, annual and periodical (FDAP) income may be subject to 30 percent withholding at source, unless a lower tax rate applies based on a tax treaty. FDAP income includes compensation for personal services, rents, royalties, interest, and dividends, among other sources.
US tax law provides some exceptions to this rule. Bank interest and portfolio interest paid to non-resident aliens are exempt from US taxation, while interest and capital gain distributions paid by US mutual funds and dividends are generally subject to 30 percent withholding. Most capital gains realized by non-resident aliens from the sale and exchange of securities are not taxable. However, if you are a non-resident alien and spend at least 183 days in the US during a certain tax year, your capital gains will be subject to 30 percent withholding.
Foreign partners in a US or foreign partnership doing business in the US are subject to 30 percent withholding on their share of the partnership’s effectively connected income for 2016. These taxpayers will be require to file form 1040NR for 2016 and claim the withholding as a credit. Except as described above, income earned by a non-resident alien which is effectively connected to a trade or business in the US is generally not subject to withholding. This income, after allowable deductions, is taxed at the graduated rates that apply to US citizens and resident aliens. Please contact our office if you are a non-resident alien and would like to learn more about the filing requirements and treaty benefits that may apply to you.
Penalty under the Affordable Care Act (a.k.a. ObamaCare)
Trump’s tax reform has effectively eliminated the individual mandate imposed by the ObamaCare act.
Election to include your Foreign Spouse in your Return (Section 6013)
If you are a US citizen or resident alien and would like to include your non-resident alien spouse in your return, you may make an election for this by attaching a statement to your joint return for the first taxable year for which the election is to be in effect.
Section 6013 Elections allow taxpayers to claim an additional personal exemption ($4,050 in 2016) and may increase the total earned income reported, thus enabling some taxpayers to claim the child tax credit for the year. However, a major disadvantage of this election is that it subjects the foreign spouse to US income taxation and reporting on all worldwide income (with the exception of self-employment taxes, which are not imposed on non-resident alien spouses making this election).
Section 6013 Elections must be made within three years from the tax return’s due date and may be revoked by the non-resident alien spouse by attaching a statement to the return for the first taxable year to which the revocation applies. Once revoked, it cannot be made again for any future year.
Foreign Earned Income Exclusion and Foreign Tax Credit
US taxpayers who have a tax home in a foreign country and receive earned income (i.e. salaries and compensation for personal services) outside the US are allowed to exclude up to $102,100 of this income in their 2017 US tax returns. An additional exclusion of foreign housing costs is also allowed in some cases.
In order to qualify for this exclusion, you must meet either the bona fide residence test or the physical presence test. The bona fide residence test is met by establishing that you are a resident in good faith in a foreign country for an uninterrupted period that includes an entire year (Jan. 1-Dec. 31 for a calendar year return). The physical presence test is met if you were physically present in a foreign country or countries for at least 330 full days during any period of 12 months in a row.
US taxpayers may also claim a credit or an itemized deduction for income taxes paid or accrued on their foreign income. If you choose to claim the exclusion, no foreign tax credit or deduction may be claimed on income that has already been excluded. However, a fractional amount of the credit may be claimed against earned income in excess of the $101,300 exclusion. The foreign tax credit may be carried back one year and carried forward for 10 years following the payment or accrual of the foreign taxes on income in a separate category that exceeds the annual limitation.
Taxpayers are encouraged to seek advanced planning in order to help them decide whether to claim the foreign earned income exclusion or not. Those wishing to revoke the exclusion in order to claim the foreign tax credit on all of their foreign earned income should attach a statement to their return for the first taxable year for which the election is to take effect. Once revoked, the exclusion generally cannot be claimed for the following 5 tax years.
Child Tax Credit and Other Credits
US taxpayers living abroad may qualify for a $1,000 child tax credit per child for certain dependents under the age of 17 who lived with the taxpayer most of the year. The dependents must be US citizens or residents. This credit is phased out by 5 percent of your adjusted gross income in excess of $110,000 if you are married filing jointly ($55,000 or $75,000 if you are married filing separately or other filing status respectively). Taxpayers must also meet certain earned income thresholds in order to qualify for the credit (see IRS Publication 972).
For tax years 2018-2025, Trump’s tax reform has raised the child tax credit from $1,000 to $2,000, of which only $1,400 will be refundable.
Tax returns claiming the child tax credit must be filed within three years of the tax return due date. In addition, the social security number of the child must be issued by the due date of the tax return that claims the child tax credit (including extensions). If you resided outside the US for more than half of the year, you will not qualify for the earned income credit.
Self-Employment Taxes
US taxpayers who earn self-employment income abroad must pay US Social Security and Medicare taxes at the rate of 15.3 percent in addition to foreign social security taxes, unless a Social Security agreement (often called “totalization agreement”) exists between the US and the country where the income was earned. Totalization agreements eliminate double taxation in cases when a citizen of one country works in another country and is required to pay social security taxes to both countries on the same earnings. They also help fill the gaps in benefit protection for these kinds of taxpayers.
As of today, the US has signed totalization agreements with 24 countries, not including Israel (see List of Totalization Agreements). This creates a major tax disadvantage for US expatriates who work as self-employed in Israel. Many of these expatriates have set up Israeli companies and pay themselves a monthly salary in order to avoid paying US social security taxes. The lack of a totalization agreement also affects US multinational companies that employ expatriate employees (working part of the year in the US and part of the year in Israel), as U.S. Social Security coverage extends to US citizens and U.S. resident aliens employed abroad by US companies. This may result in dual social security tax liability for both the employers and the employees. Advanced planning is of the essence to avoid dual taxation. Taxpayers who own shares in an entity which is taxed as a partnership must generally pay self-employment taxes on their share of the partnership unless they are considered limited partners.
The minimum net earnings required for a quarter of coverage (QC) in 2018 is $1,320. Taxpayers can earn a maximum of four quarters per year towards social security benefits. Once 40 quarters of coverage are accumulated, taxpayers can apply for social security and Medicare benefits upon reaching retirement age. We recommend to apply for benefits at the local US Consulate in your country of residence.
Stock Options
Stock option programs offered by foreign employers are usually considered non-statutory and not entitled to the same tax benefits as qualified programs offered by US employers. If the fair market value of the options is not readily ascertainable at the time the options are granted, no income is recognized upon receipt of the option. Rather, taxpayers must recognize as salary income the value of the stock less the amount paid (often known as the “spread”) in the year the option is exercised, unless the stock is not vested on that same year. If the stock is not vested when the option is exercised, income must be deferred until the vesting year. If the non-statutory stock option has an ascertainable fair market value, taxpayers must recognize as salary income the value of the option less any amount paid in the first year that the option is substantially vested.
Foreign Passive Investment Companies (PFICs)
US taxpayers who own stock in foreign companies that are mainly engaged in passive activity (such as foreign mutual funds, foreign hedge funds, foreign holding companies ect.) may be liable to a special tax on distributions and capital gains equal to the highest individual tax rate for the holding period plus interest.
These companies are commonly referred to as PFICs (Passive Foreign Investment Companies). The US Tax Code defines as a PFIC any foreign company owned by US taxpayers in which: 1) 75 percent or more of the company’s gross income is passive income (i.e. interest, dividends, capital gains, and certain rents and royalties), or 2) 50 percent or more of the company’s average assets for the year are held for the production of passive income. Shareholders of PFICs must file Form 8621 to report certain distributions and gains on disposition of the fund stock (see Summary of Informational Returns).
In Israel, the most common type of PFICs are karnot neemanut (Israeli trust funds). But there are many other securities that may fall under this category. If you have questions about a specific type of security, please contact our office.
Shareholders of PFICs whose stock is regularly traded on certain national and foreign stock exchanges can avoid the additional tax and interest by electing to treat their PFIC stock as mark-to-market. Under this method, taxpayers include in income each year any excesses of the fair market value of the stock as of the close of the tax year over the shareholder’s adjusted basis in such stock. Taxpayers are also allowed a deduction equal to the excess of the adjusted basis of the stock over the fair market value as of the close of the tax year. This loss must be reduced by any mark-to-market gains recognized in previous years.
State & Local Tax Issues
US taxpayers residing abroad normally do not need to file state and local tax returns, unless they have income from real estate property or are shareholders in pass-through entities (such as partnerships and S-Corporations). In such cases, a non-resident tax return must be filed in the state where these assets are located.
Tax Treaties
The United States has tax treaties with 68 foreign countries. These treaties allow residents of foreign countries reduced tax rates or total exemptions from U.S. income taxes on certain sources of income received within the US, and grant similar benefits to U.S. citizens or residents who receive income in a treaty foreign country.
Most tax treaties contain the Saving Clause, by which the US government preserves the right to tax its citizens and resident aliens as if no tax treaty had gone into effect. As a result of this, US citizens and resident aliens residing overseas in most cases cannot benefit from treaty provisions granting reduced U.S. tax rates or exemptions. Some notable exceptions to this include the treatment of Social Security and Bituach Leumi (Israeli National Insurance) benefits paid to U.S. taxpayers residing in Israel, which are exempt from taxation in both countries, and the treatment of annuities, which are only taxed in the taxpayer’s country of residence. The US-Israel treaty also allows Americans residing in Israel to deduct their Israeli charitable contributions in Schedule A.
In some cases, non-resident aliens doing business or receiving income in the US can benefit from several provisions of tax treaties signed by the US, which limit or eliminate US income taxes on personal services income and investment income. Please contact our office if you need specific advice on treaty benefits.
Special Rules for Taxpayers wishing to Renounce their US Citizenship
As a result of the increasingly complex FATCA rules, many Americans abroad are considering the option of renouncing their U.S. citizenship in order to avoid being subject to US taxation on their worldwide income
Officially renouncing your US citizenship through the local consulate does not automatically exempt you from US taxation on worldwide income. In order to expatriate for tax purposes, taxpayers must file a final 1040 for the year they renounced their citizenship and file form 8854 (Expatriation Statement) with the IRS. The main purpose of this form is to confirm that you have complied with all federal US tax obligations for the last five years preceding your expatriation. Failure to file this form will render you a US person for tax purposes until the form is filed.
If you have not filed tax returns for the last few years, you will need to get back to compliance before starting this process.
American expats should also be aware that the IRS imposes an exit tax on certain high net worth individuals. Taxpayers whose net worth was $2 million or more on the date of their expatriation or whose average tax liability for the last five years exceeded $161,000 are subject to an exit tax on the net unrealized gain from most types of assets as if the property had been sold at its fair market value on the date of their expatriation (i.e. the FMV of your assets minus their cost basis). Exceptions to this rule are deferred compensation items, specified tax deferred accounts and interests in non-grantor trusts, which are subject to special tax rules upon expatriation. This gain is only taxable to the extent that it exceeds the IRS annual exclusion, which is $693,000 for 2016. There is also the option of deferring the tax on selected property until the property is disposed of.
These expatriation tax rules also apply to long-term residents (individuals who have been lawful permanent residents of the United States for at least 8 of the last 15 years).
Repatriation Tax & GILTI on US-owned Foreign Corporations
One of the consequences of Trump’s tax reform is the imposition of additional taxes on profits of certain foreign corporations owned by US persons. In this section, we provide background on the new legislation, describe these taxes in full and explain how they will affect American expats who own foreign corporations.
Transition to territorial taxation for U.S. corporations
Prior to the new law, US corporations were taxed on their worldwide income, including dividends received from foreign subsidiaries. These subsidiaries were generally not taxed, thus allowing U.S. companies to defer millions of dollars of taxable income until the profits were repatriated.
Under the new tax regime, US corporations are no longer taxed on their worldwide income. As part of the transition towards territorial taxation, the US government will impose a one-time exit tax on the US shareholders’ share of accumulated profits in foreign corporations that are more than 50% owned by US persons (known as CFCs, controlled foreign corporations) or have a 10% US corporate shareholder. In order to balance the field and discourage the outflow of U.S. capital to foreign countries, the new law also imposes a current tax on certain low-taxed profits received by CFCs.
The trigger for much alarm and fear among American expats is that these two taxes will also be imposed on US individuals who own at least 10 percent of a CFC. This is despite the fact that individuals will not benefit from any of the territorial provisions in the new law.
One-time repatriation tax on CFCs and other specified foreign corporations
US corporations and individuals who are 10 percent shareholders in CFCs and other specified foreign corporations will be taxed on their share of the post-1986 accumulated earnings and profits of these corporations as of the end of 2017 or November 2, 2017, whichever is higher.
The tax rate will be 15.5% of the foreign cash position related to these profits and 8% on the remaining profits. Taxpayers who own CFCs and other specified foreign corporations with accumulated losses will be able to deduct these losses against taxable profits.
US corporations will be able to claim the foreign tax credit for foreign corporate taxes paid on these profits. However, 55.7% of the tax paid on accumulated profits held in cash and cash equivalents and 77.1% of all other taxes will be disallowed. It is important to note that individuals who own CFCs, by default, will not be able to claim the foreign tax credit for taxes paid by their foreign corporation (see discussion below regarding potential solutions to this problem). To make the situation even worse, per Sec. 78 of the Internal Revenue Code, a proportional amount of the foreign tax credit claimed will need to be added back to taxable income. US taxpayers have the option of paying this tax in installments over a 8-year period.
Current tax on global intangible low-taxed income
US corporations and individuals who own 10% of a CFC will also need to include in taxable income their share of the company’s global intangible low-taxed income (GILTI) starting 2018. GILTI consists of the foreign corporation’s gross income minus several exclusions and deductions allocable to such gross income. Exclusions include 10% of investment in certain qualified tangible assets minus interest, income effectively connected with the conduct of a US trade or business, Sub-part F income, certain related party transactions and foreign oil and gas income.
In computing their GILTI, US corporations are allowed a deduction equal to 50% of this income (37.5% beginning 2025) and a foreign tax credit equal to 80% of the foreign tax paid. Sec. 78 gross-up will apply as well.
The million dollar question: What to do about this
Thankfully, there is a section in the tax code that can help alleviate some of the tax burden effected on US individual: Section 962 allows individuals to elect the application of corporate tax rates with respect to their income from CFCs. This election also allows them to claim the foreign tax credit for taxes paid by their foreign corporation. The new law allows U.S. individuals to make a Sec. 962 election with respect to the expatriation tax and GILTI. It is important to note that the same limitations discussed above on the amount of the credit claimed by corporations will apply to individuals. This election is not likely to eliminate the taxes completely, as this largely will depend on the corporate tax rates that apply in the country where the CFC is based.
Summary of Information Returns Based on IRS Instructions (irs.gov)
The following form must be filed separately by June 30 every year. It should not be attached to your U.S. income tax return:
FinCEN Form 114: FBAR (Foreign Bank Account Report)
Who must file? A U.S. taxpayer that has a financial interest or signature over a foreign financial account, if the aggregate value of the account exceeds $10,000 at any time during the year. If you have not filed FBARs in the past, you only need to file for the last 6 years.
Penalties: Willful civil penalties of up to $100,000 or 50 percent of the value of the account, Non-willful civil penalties of $10,000 per violation. Criminal penalties may also apply in some cases.
The following forms must be filed as part of your U.S. income tax return by the due date of the return including extensions:
Form 8938: Statement of Specified Foreign Financial Assets
Who must file? A U.S. taxpayer that has an interest in certain specified foreign financial assets with an aggregate value exceeding certain thresholds. For example, a married couple living in the U.S. and filing a joint tax return would not file Form 8938 unless their total specified foreign assets exceed $100,000 (or $400,000 if residing abroad) on the last day of the tax year or more than $150,000 (or $600,000 if residing abroad) at any time during the tax year.
Penalties: $10,000 penalty, with an additional penalty up to $50,000 for continued failure to file after IRS notification. A 40 percent understatement penalty attributable to non-disclosed assets may also be imposed.
Form 926: Return by a U.S. Transferor of Property to a Foreign Corporation
Who must file? Taxpayers who contribute cash or other property to a foreign corporation or partnership in exchange for stock in the foreign entity. Taxpayers may be liable to an additional tax from contributions of appreciated property.
Penalties: 10 percent of the fair market value of the property at the time of the transfer. This penalty is limited to $100,000 unless the failure to comply was due to intentional disregard. For tax year 2011 and onwards, a 40 percent penalty may be imposed for underpayment of tax resulting resulting from a foreign financial asset understatement.
Form 8621: Report Return by a Shareholder of a PFIC (Passive Foreign Investment Company) or Qualified Electing Fund
Who must file? U.S. persons that are shareholders in a PFIC must report certain transactions in respect of the PFIC, including distributions and gains from the disposition of its stock. A PFIC is a foreign corporation which meets either of the following: 1) 75 percent of its gross income for the year is passive income, 2) At least 50 percent of its assets produce or are held for the production of passive income.
Form 5471: Information Return of U.S. Persons with Respect to Certain Foreign Corporations
Who must file? A U.S. taxpayer that meets any of the following: 1) Becomes an officer in a foreign corporation owned by U.S. citizens, 2) Acquires a 10 percent interest in a foreign corporation, 3) Has control (more than 50 percent of the stock of voting power) of a foreign corporation for a period of 30 days or more during the year, 4) Owns at least 10 percent of a foreign corporation that is controlled by U.S. shareholders.
Penalties: $10,000 penalty, with an additional penalty up to $50,000 for continued failure to file after IRS notification. In addition, a 10 percent reduction of the foreign tax credit available to be claimed may be imposed, with additional 5 percent reductions for continued failure to file every three months after IRS notification. Criminal penalties may also apply in some cases.
Form 8865: Return of U.S. Persons with Respect to Certain Foreign Partnerships
Who must file? A U.S. taxpayer that meets any of the following: 1) Has control (more than 50 percent of the stock of voting power) of a foreign partnership at any time during the partnership’s year, 2) Owns at least 10 percent of a foreign partnership that is controlled by U.S. partners, 3) Contributes property to a foreign partnership and owns at least 10 percent of the foreign partnership immediately after the contribution, 4) Acquires or disposes of a foreign partnership interest, thus changing the taxpayer’s proportional interest in the partnership above or below 10 percent.
Penalties: $10,000 penalty, with an additional penalty up to $50,000 for continued failure to file after IRS notification. In addition, a 10 percent reduction of the foreign tax credit available to be claimed may be imposed, with additional 5 percent reductions for continued failure to file every three months after IRS notification. Criminal penalties may also apply in some cases.
Form 3520: Annual Return to Report Transactions with Foreign Trusts and Receipt of Certain Foreign Gifts
Who must file? A U.S. taxpayer that meets one of the following: 1) Is considered a Responsible Party (see Instructions to form 3520) for the creation of a foreign trust by a U.S. person, the transfer of property, directly or indirectly, to a foreign trust by a U.S. person, or the death of a U.S. taxpayer if the decedent was treated as the owner of any portion of the foreign trust under the grantor trust rules, or any portion of the foreign trust was included in the gross estate of the decedent, 2) Owns any part of a foreign trust’s assets under the grantor trust rules, 3) Received (directly or indirectly) a distribution from a foreign trust during the current tax year, or a related foreign trust held an outstanding obligation issued by the taxpayer (or a related person) that the taxpayer treated as a qualified obligation (see Instructions to Form 3520), 4) Received gifts in excess of $100,000 from non-resident alien individuals or foreign estates during the tax year, or gifts in excess of $14,139 from foreign corporations or foreign partnerships.
Penalties: The following penalties may apply for failure to timely file or if the information is incomplete or incorrect: 1) 35 percent of the gross value of any property transferred to a foreign trust for failure by a U.S. transferor to report the transfer, 2) 35 percent of the gross value of the distributions received from a foreign trust for failure by a U.S. transferor to report receipt of the distribution, 3) 5 percent of the amount of certain foreign gifts for each month for which the failure to report continues, for up to 25 percent.
List of Totalization Agreements:
Country Entry into Force
Italy November 1, 1978
Germany December 1, 1979
Switzerland November 1, 1980
Belgium July 1, 1984
Norway July 1, 1984
Canada August 1, 1984
United Kingdom January 1, 1985
Sweden January 1, 1987
Spain April 1, 1988
France July 1, 1988
Portugal August 1, 1989
Netherlands November 1, 1990
Austria November 1, 1991
Finland November 1, 1992
Ireland September 1, 1993
Luxembourg November 1, 1993
Greece September 1, 1994
South Korea April 1, 2001
Chile December 1, 2001
Australia October 1, 2002
Japan October 1, 2005
Denmark October 1, 2008
Czech Republic January 1, 2009
Poland March 1, 2009
Filing Threshold Table (for Tax Year 2017):
Filing Status Age Gross Income (US$)
Single Under 65 10,400
Single 65 or older 11,950
Married Filing Jointly Under 65 20,800
Married Filing Jointly 65 or older (one spouse) 22,050
Married Filing Jointly 65 or older (both spouses) 23,300
Married Filing Separately Any age 4,050
Head of Household Under 65 13,400
Head of Household 65 or older 14,950
Qualifying Widow(er) with dependent Under 65 16,750
Qualifying Widow(er) with dependent 65 or older 18,000
Note: If you received at least $400 of gross income from self-employment, you must file a return even if your total gross income does not reach the thresholds listed above.
Individual Tax Rate Tables (for Tax Year 2018):
Married Taxpayers Filing Jointly
If Taxable Income Is: The Tax Is:
$0 – $19,050 10 percent of the taxable income
$19,051 – $77,400 $1,905 + 12 percent of the excess over $19,050
$77,401 – $165,000 $8,907 + 22 percent of the excess over $77,400
$165,001 – $315,000 $28,179 + 24 percent of the excess over $165,000
$315,001 – $400,000 $64,179 + 32 percent of the excess over $315,000
$400,001 – $600,000 $91,379 + 35 percent of the excess over $400,000
$600,001 + $161,379 + 37 percent of the excess over $600,000
Single Taxpayers
If Taxable Income Is: The Tax Is:
$0 – $9,525 10 percent of the taxable income
$9,526 – $38,700 $952.50 + 12 percent of the excess over $9,525
$38,701 – $82,500 $4,453.50 + 22 percent of the excess over $38,700
$82,501 – $157,500 $14,089.50 + 24 percent of the excess over $82,500
$157,501 – $200,000 $32,089.50 + 32 percent of the excess over $157,500
$200,001 – $500,000 $45,689.50 + 35 percent of the excess over $200,000
$500,001 + $150,689.50 + 37 percent of the excess over $500,000
Taxpayers Filing as Head of Household
If Taxable Income Is: The Tax Is:
$0 – $13,600 10 percent of the taxable income
$13,601 – $51,800 $1,360 + 12 percent of the excess over $13,600
$51,801 – $82,500 $5,944 + 22 percent of the excess over $51,800
$82,501 – $157,500 $12,698 + 24 percent of the excess over $82,500
$157,501 – $200,000 $30,698 + 32 percent of the excess over $157,500
$200,001 – $500,000 $44,298 + 35 percent of the excess over $200,000
$500,001 + $149,298 + 37 percent of the excess over $500,000
Married Taxpayers Filing Separately
If Taxable Income Is: The Tax Is:
$0 – $9,525 10 percent of the taxable income
$9,526 – $38,700 $952.50 + 12 percent of the excess over $9,525
$38,701 – $82,500 $4,453.50 + 22 percent of the excess over $38,700
$82,501 – $157,500 $14,089.50 + 24 percent of the excess over $82,500
$157,501 – $200,000 $32,089.50 + 32 percent of the excess over $157,500
$200,001 – $300,000 $45,689.50 + 35 percent of the excess over $200,000
$300,001 + $80,689.50 + 37 percent of the excess over $233,475
Filing Deadlines
The deadline for filing your 2017 individual federal tax returns is April 16. US taxpayers residing overseas on the regular due date of their return are allowed an automatic 2-month extension to file their return and pay any amount due without requesting an extension. An additional extension to October 15 may be requested by filing form 4868 by June 15. However, any balance due must be paid by April 15. Taxpayers who are out of the country as defined in the form 4868 instructions can request a discretionary additional 2-month extension to December 17.