Guide To Ireland Expat Tax Advice
The Tax Samaritan country guide to Ireland Expat Tax advice is intended to provide a general review of the tax environment of Ireland and how that will impact your U.S. expatriate tax return as a U.S. Expat in Ireland.
As a U.S. taxpayer, all worldwide income is subject to taxation and reporting and for most expatriates you are required to file a U.S. tax return on an annual basis due on April 15 each year (June 15 if you are residing overseas on the April 15 deadline). The tax treatment for different classes of income can vary greatly from Ireland and the U.S. For example, certain benefits may be tax free or excluded from taxable income in Ireland, but in the U.S. these benefits are likely to be non-qualified benefits that are subject to being included as taxable income in U.S. As such, there are a number of considerations related to Ireland Expat Tax and this brief article will address a few of those considerations.
US Expat Living In Ireland
The Emerald Isle, as it is sometimes referred to, is a popular retirement spot for American expats. More than 34 million Americans claim Irish ancestry so it is no surprise that many Americans are choosing to go back to their roots and settle in Ireland. The island’s landscape features medieval stone castles, lush rolling hills and quaint cobblestone-paved towns. Farms dotted with grazing livestock and wooden farmhouses line the countryside. If you are thinking of relocating to Ireland, here are 3 of the best places to live:
- Waterford: This coastal city located in southeast Ireland has a magical feel. It is a lovely town at night when it is all lit up. The lights of waterfront Georgian townhouses that line the quay twinkle in the harbor and Reginald’s Tower looks majestic standing guard over the city as it has since the 11th century.
- Dublin: Dublin is the city that most tourists are familiar with when they hear the word Ireland. It is the country’s largest city and offers lots of outdoor recreation, cultural riches and a high quality of life. Dublin is quite the cosmopolitan city, yet offers a more intimate feel than some of the other large cities in the United States. What sets Dublin apart from other cities elsewhere is its storied political and literary history.
- Killarney: Killarney is a city located on the southern coast of Ireland. It is one of the most beautiful cities in Ireland offering residents stunning scenery. This lovely town is located within close proximity to a number of beautiful waterfalls, lakes and woodlands. This small, cozy city has plenty of excellent eateries, a compact walkable downtown and great golf courses.
Guide to Expat Tax in Ireland
As a United States taxpayer, it is important to understand how living in Ireland will impact your taxes. If you are an American citizen, all income that you earn worldwide is subject to reporting and taxation. You are required to file a United States tax return with the Internal Revenue Service every year, no matter which country you currently live. Therefore, most expatriates living in Ireland will be required to file a United States tax return every year before June 15th
Who Is Liable For Income Taxes In Ireland
If you are an American living in Ireland, you must include income that is earned in Ireland and elsewhere in the world on your United States tax return every year. This includes income that is subject to tax in Ireland.
What Are Special Provisions That Help Protect American Citizens From Being Taxed Twice?
The amount of money that you pay in taxes to the United States might be lowered by deductions and credits that are from income that you earn in Ireland. Here are a few exclusions that can help reduce double taxation for expats living in Ireland.
- With the Foreign Housing Exclusion, you can exclude some household expenses that you incur as a result of living in Ireland or elsewhere abroad. The housing expenses must meet a certain threshold to apply for the exclusion.
- The Foreign Tax Credit allows you to exclude income earned in Ireland from your United States tax return.
- Up to $101,300 of foreign income can be excluded from your United States taxes for 2016 with the Foreign Earned Income Exclusion.
How Is Income Taxed in Ireland?
Irish residents that are domiciled have to pay taxes on worldwide income. Irish considers residents to be domiciled if Ireland is their permanent home. If you currently live in Ireland but plan to return to the United States at some point in the future, then you are not considered to be domiciled in Ireland, although you may be an Irish resident.
Ireland taxes domiciled residents based on a remittance basis. This means that domiciled residents are taxed on earnings from Ireland as well as employment earned elsewhere but paid to Ireland. One benefit to expats is the fact that if you keep your main residence in the United States, rather than Ireland and retain investments outside of the Ireland, income earned from investments will only be subject to taxes in Ireland if you bring it into the country. This means that expats will not be subject to double taxation.
How Do I Know If I Am Considered to Be an Irish Tax Resident?
You are considered to be an Irish resident if you spend more than 182 days a year in the country or 280 days total in the last two tax years.
Tax Filing Payment Rules and Tax Withholding in Ireland
Similar to how most United States employers deduct taxes, expats that are employed in Ireland have their income tax automatically deducted from pay. Ireland has an advantage over the U.S. when it comes to filing returns. The deductions that are taken out of your paycheck are automatically adjusted and include all of the credits and tax rates that you are eligible to receive. That means that expats do not have to file a separate Irish tax return as everything is automatically taken out of your pay.
When you begin working in Ireland, you will fill out several forms to ensure that of the tax credits that you are eligible for are automatically applied. Although, if you have self-employment earnings in Ireland, you will be required to file an Irish tax return every year. Ireland’s due date for tax returns is Oct. 31st of each year. Whether your Ireland tax return is automatically filed or not, remember that you will still need to file a United States tax return by June 15th for each year.
Below is our Ireland Expat Tax advice for your US expat tax return:
- If you are a U.S. citizen or a resident alien of the United States and you live in Ireland, your US expat tax return in Ireland is based on your worldwide income and as such you must file a U.S. return for all the years that you are residing in Ireland. However, as a U.S. expat you may qualify to reduce your U.S. taxable income up to an amount of your foreign earnings that is adjusted annually for inflation ($102,100 for 2017). In addition, you can exclude or deduct certain foreign housing amounts. This is known as the Foreign Earned Income Exclusion and foreign housing exclusion .
- When it comes to your Ireland Expat Tax, most US expatriates worry about “double taxation” – paying taxes to two different countries – the U.S. and Ireland. A U.S. taxpayer working overseas in Ireland may be able to reduce U.S. taxable income and “double taxation” by claiming the Foreign Tax Credit on Form 1116. Should any foreign income not be fully offset by the foreign earned income exclusion, housing exclusion or housing deduction, the foreign tax credit paid or accrued may be used as a deduction or credit on the U.S. tax return. Taxpayers can elect to either deduct the taxes as an itemized deduction on Schedule A or claim a credit against tax. In most cases, it is to your advantage to take foreign income taxes as a tax credit.
A common but dangerous mistake is the assumption that if there are zero taxes owed with these tax benefits that a US tax return while living in Ireland does not need to be filed. That is not true. If you are working overseas, it is likely that you meet the filing requirements to file a tax return and must do so. It is important to note that these tax benefits, such as the foreign earned income exclusion and foreign tax credit are not applicable to the outcome of your tax liability and tax return until they are claimed on a filed tax return. So, be sure to file your US expat tax return!!!
When it comes to Ireland expat tax advice there are many tax items to consider, but the above are by far the most common tax benefits. With top-notch experienced and knowledgeable expat tax preparation from Tax Samaritan, you can be assured that you are paying the minimal amount of U.S. taxes that you are legally obligated for.
U.S.- Ireland Tax Treaty And Tax Relief For Ireland Expat Tax
The U.S. does have a tax treaty with Ireland.
Please click on the link to the U.S. – Ireland Tax Treaty .
Ireland Foreign Bank Account Reporting – The FBAR (FinCen Form 114)
Another important tax deadline that frequently applies to Ireland Expat Tax is in regards to the disclosure of foreign assets on the FBAR (Foreign Bank Account Report – Form 114 – formerly known as TD F 90-22.1).
The FBAR filing deadline is April 15th. Unfortunately, requesting an extension on your individual return does not extend the FBAR due date – there is no extension available for the FBAR deadline. Any reports filed after this date are considered a delinquent FBAR. In addition, the FBAR is different than many other tax forms in that it must be received by the deadline date (and not postmarked by the deadline date).
The FBAR must be filed with the Treasury Department (it is not filed with your federal income tax return) whenever you meet the FBAR filing requirements, which in a nutshell is whenever a U.S. person has a financial interest in, or signature authority over a foreign financial account, including a bank account, brokerage account, mutual fund, trust or other type of foreign financial account (including an insurance policy with a cash value such as a whole life insurance policy) maintained with a financial institution, with an aggregate value of over $10,000 at any time during the calendar year based on the highest value of each foreign account during the tax year.
If you have bank accounts Bank of Ireland, Allied Irish Banks, Danske Bank, Ulster Bank or at another bank in Ireland or any other foreign country, you may meet the filing requirement to disclosure your foreign accounts on the FBAR. Please don’t hesitate to contact Tax Samaritan to learn more about your filing requirements.
Qualified Dividends In Ireland For Your Foreign Corporation or Investment
Since 2003, dividends paid to individual shareholders from either a domestic corporation or a “qualified foreign corporation” are subject to tax at the reduced rates applicable to certain capital gains. A qualified foreign corporation includes certain foreign corporations that are eligible for benefits of a comprehensive income tax treaty with the United States. Ireland foreign corporations are eligible for this lower “qualified” dividend rate and can be a significant benefit for reduced Ireland Expat Tax.
U.S. – Ireland Social Security Totalization Agreement
The United States has entered into agreements, called Totalization Agreements, with several nations for the purpose of avoiding double taxation of income with respect to social security taxes. These agreements must be taken into account when determining whether any alien is subject to the U.S. Social Security/Medicare tax, or whether any U.S. citizen or resident alien is subject to the social security taxes of a foreign country.
As of this time, Ireland has entered into a Totalization Agreement with the United States thus there is opportunity to avoid double taxation of social security income for Ireland Expat Tax.
Click here to read more on the US – Ireland Totalization Agreement .
Testimonial Of Clients Residing In Ireland
We have many expat tax preparation clients that live and work in Ireland. Below are a few tax preparation testimonials of clients in Ireland for your review, however we encourage you to view recommendations left for us on our LinkedIn page. These are independent tax preparation testimonials from real customers, with tax situations just like “yours”. If you are unable to view our testimonials, please “connect” with us on LinkedIn for access. Otherwise, please view our Tax Testimonial snapshot.
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Our goal at Tax Samaritan is to provide the best counsel, advocacy and personal service for our Ireland Expat Tax. We are not only tax preparation and representation experts, but strive to become valued business partners to American expatriates in Ireland. Tax Samaritan is committed to understanding our client’s unique needs; every tax situation is different and requires a personal approach in providing realistic and effective solutions.
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Tax Samaritan is a team of Enrolled Agents with over 25 years of experience focusing on Ireland Expat Tax and throughout the world. We maintain this tax blog where all articles are written by Enrolled Agents. Our main objective is to educate US taxpayers on their tax responsibilities and the selection of a tax professional. Our articles are also designed to help taxpayers looking to self prepare, providing specific tips and pitfalls to avoid.
When looking for a tax professional, choose carefully. We recommend that you hire a credentialed tax professional such as Tax Samaritan that is an Enrolled Agent (America’s Tax Experts) that is experienced and knowledgeable about Ireland Expat Tax. If you are a US taxpayer overseas, we further recommend that you seek a professional who is experienced in expat tax preparation, like Tax Samaritan (most tax professionals have limited to no experience with the unique tax issues of expat taxpayers).
Randall Brody is an enrolled agent, licensed by the US Department of the Treasury to represent taxpayers before the IRS for audits, collections and appeals and experienced with Ireland Expat Tax. To attain the enrolled agent designation, candidates must demonstrate expertise in taxation, fulfill continuing education credits and adhere to a stringent code of ethics.
Every effort has been taken to provide the most accurate and honest analysis of the tax information provided in this blog. Please use your discretion before making any decisions based on the information provided. This blog is not intended to be a substitute for seeking professional Ireland Expat Tax advice based on your individual needs.