U.S. Expatriate Taxes In China

Many individuals wonder how living in China will affect their U.S. expat taxes. As a major manufacturing hub, China is a place where many Americans find themselves relocated in Beijing, Shanghai, Guangzhou, or other regions for work purposes. With the incredible rate of growth in the last 20 years, it is easy to see why people are investing their time and money in China. That said, China also has one of the most complex tax structures for expatriates. It is important to understand your U.S. expat taxes both in China and in the U.S.

Protax is the world’s leading U.S. individual international tax firm, specializing in the delivery of world class professional services to U.S. Expatriates.

Please visit our Country Tax Resource Guide for Filing Taxes as an American Living in China.

U.S. Expat Taxes in China

U.S. citizens and U.S. green card holders (resident aliens) have unique filing obligations, unlike the citizens of other tax jurisdictions. The U.S. imposes income taxation based upon citizenship, not based on tax residency and U.S. resident aliens are taxable on worldwide income for their lifetime unless they expatriate completely.

U.S. citizens and U.S. green card holders living and working outside the United States are required to file a U.S. tax return annually and report their worldwide income if they continue to meet the annually indexed minimum tax filing threshold amounts, consisting of the standard deduction and exemption.

Residing and working outside of the United States may permit the application of special tax laws and regulations when certain qualifications are met, permitting the offset of U.S. tax obligations in part or in their entirety. These rights of offsets are the result of the integration between the Foreign Earned Income Exclusion (FEIE), Housing Exclusion (HE) and/ or Housing Deduction (HD) available on Form 2555 – Foreign Earned Income and Foreign Tax Credits (FTC) available on Form 1116 – Foreign Tax Credit. The Foreign Tax Credit on Form 1116 may be considered if the foreign country has a foreign income tax.

At Protax Consulting Services, our primary goal and objective is to use these interplay of mechanisms – the Foreign Earned Income Exclusion (FEIE), Housing Exclusion (HE) and/ or Housing Deduction (HD) –in combination to wipe out any U.S. income tax.

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