Tax Laws in the USA

Laws for tax in the USA are quite complex and individuals are subject to federal tax at certain tax rates which can vary from 0 to 39.6% of the income that they earn

For expats, immigrants and non-immigrants tax must be paid having social security and Medicare insurance.

Tax payment for expats who are permanent residents of the USA will be determined by their income which is the same as Citizens of the country. A tax payment for residents is determined after checking if you meet the requirements for the green card test or substantial presence test.

The Green Card Test is for a foreign national who has permanent residency in the country and is a resident alien for tax purposes. The status for this begins in the first calendar year of when they were given permanent residency. This then continues until the resident status has been discarded.

The Substantial Presence Test is for a foreign national who has been present in the country for at least 31 days during the year and in total for 183 days or more in the current calendar year.

Non-immigrants may be excused under the substantial test and may rule out days or presence in the country. This will also apply to individuals who are commuting from Canada or Mexico, have a medical condition, and foreign government workers.

Residents of the country must file a yearly tax return, which should show their worldwide income which is received in that tax year. Residents who paid foreign income taxes on income can be eligible for a tax credit or less tax payment.

As an expat, if you are your first or last year of being a permanent resident, you will be considered as a non resident as well as a resident for a portion of the year. You are required to file a dual status tax return for this non-residency period where you will only report US source income and your worldwide income of the year for when you was still a US resident.

If you are not a resident of the US, you are subject to tax only on income which has come from within the United States. This can include self employment, trade of business and payment from employment.

Expats who are in the USA for less than 183 days during the year will not be liable for paying the federal income tax on any interest or capital gains. You may also be excused from Social Security and Medicare Taxes.

It is highly advised that if you are moving to the USA, to hire a tax planner who will give you more information and will make it simpler to understand the expat tax system.