For most U.S. expats, double taxation happens rarely. Your employer is not required
to withhold any U.S. taxes from your salary if you are also paying income taxes abroad.
In addition, most expats can offset their foreign-earned income using the following
deductions and exclusions:

• Foreign Earned Income Exclusion
• Foreign Housing Exclusion
• Foreign Housing Deduction (for self-employed income only)
• Foreign Tax Credit
• Foreign Tax Deduction
• Totalization Agreements and Tax Treaties

Only the income that exceeds these deductions may face double taxation. All your
worldwide income must be reported on Form 1040, even if it is ultimately wiped out by
these allowable deductions.

If U.S. nonresidents have passed either the Substantial Presence Test or the Green Card Test, they can file Form 1040 and take advantage of all allowable tax credits and deductions. Nonresidents can also file Form 1040 if they had dual-status residence (both U.S. resident and nonresident) in the same year, or if they have made an election with the IRS to be treated as U.S. tax residents. However, such nonresidents must report their worldwide income on Form 1040, unlike Form 1040-NR, which requires reporting only U.S.-sourced income. It is advisable to seek a knowledgeable tax expert who understands how your visa type and existing tax treaties may affect your eligibility to file Form 1040.

Your non-U.S. spouse or child can qualify to appear on your federal tax return by obtaining an Individual Taxpayer Identification Number (ITIN) from the IRS. This can give you some benefits on your tax return, although to claim certain credits—such as the Child Tax Credit—your family members must have U.S. Social Security numbers (SSNs). ITINs may also make it easier for such family members to invest in the United States. However, including a non-U.S. spouse or children on a U.S. tax return may expose their current or future worldwide income, property, inheritances, and other assets to U.S. taxation. They would generally avoid such taxation only by formally terminating U.S. citizenship or U.S. tax residency. If you have nonresident family members, careful planning is essential before choosing to obtain an ITIN or SSN for them. We can help you evaluate your tax situation and goals to determine the most appropriate tax strategies as your life abroad evolves.

You will calculate your net rental income in U.S. dollars on Schedule E, just as you would if your rental income property were in the United States. This means you can take allowable deductions against the income, but your rental property must be depreciated over 30 years instead of 27.5 years. If your overseas rental property is owned or co-owned by a nonresident spouse, you may not be able to claim any net loss against rental income. If the real estate property is held under a trust or business structure, you may be subject to complex requirements to file foreign entity or business information returns and, in some cases, additional income tax returns.