Moving to another country for a job involves a lot of changes, but one thing stays the same.
Thanks to our worldwide tax system for individuals, as a U.S. citizen you remain a U.S. taxpayer, regardless of where you live. That makes you responsible for filing federal tax returns on your overseas earnings.
Uncle Sam, however, does provide some tax breaks to his citizens living and working abroad. They get more time to file, with a June 15 deadline. And thanks to tax treaties, globally peripatetic taxpayers also get certain foreign earned income exclusions and/or foreign income tax credits.
These exclusion amounts also are affected by the cost of living, as noted in Part 8 of the ol' blog's 2024 annual inflation and taxes series.
Those annual adjustments also include the cost of finding an acceptable flat, appartement, villa, casa, haus, or any other dwelling in a place with a language beyond my rudimentary translation skills.
Annual housing abroad adjustments: Since costs of living vary widely, the U.S. Department of State tracks the worldwide amounts and grants an allowance to employees officially stationed in a foreign location where the cost of living, exclusive of quarters costs, is substantially higher than in Washington, D.C.
The IRS follows this list and, based on the housing data, allows U.S. taxpayers in those designated locales to exclude from their income (or deduct, if self-employed) an amount greater than the basic housing amount, which for 2024 is $37,950.
This announcement of a bigger housing tax benefit typically is made months after the tax agency's typical fall release of its general inflation figures. Most of those 2024 numbers were released last fall, and are part of the ol' blog's aforementioned annual inflation adjustments series; shameless plug alert, Part 1 has a full directory of the posts).
The IRS released this year's allowances for higher housing costs on March 20 in Notice 2024-31, Determination of Housing Cost Amounts Eligible for Exclusion or Deduction for 2024.
Added international housing adjustments: My previously mentioned prior tax inflation series post — final, I promise, shameless plug: Inflation adjustments that will apply to Americans abroad in 2024 — goes into more detail on the basic international housing tax exclusion or deduction.
But if you live in one of the more expensive locales cited in IRS Notice 2024-31, you get more than the basic annual residential allowance. Again, that's $37,950 for 2024.
As the notice says right off the top, "These adjustments are based on geographic differences in housing costs relative to housing costs in the United States."
Of course, since I've dreamed of living in Italy even before Stanley Tucci's magnificent food/travelogue series (we're not going to get the rest of the award-winning actor's food finds across the whole Boot, but at least NatGeo is giving us another version!), I scrolled down the new notice's table to see which Italian cities are considered overly expensive vis-à-vis U.S. residence expenses.
Six locales in that Mediterranean peninsula nation get higher housing allowances. They are:
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Genoa at $41,800 |
Naples at $46,900 |
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La Spezia at $40,400 |
Rome at $45,700 |
|
Milan at $68,300 |
Vicenza at $38,100 |
If you're already in or going to Hong Kong, China, you get a housing allowance of $114,300. You get $73,100 if moving to or in Tokyo, Japan. Geneva, Switzerland, expatriates get $107,400.
Closer to home, a residence in Toronto, Ontario, Canada (the most expensive place in our neighbors to the north) will get you a housing amount of $61,900. If you work south of the U.S. border, you're given an allowance of $47,900 for a place in Mexico City.
And while relocations are not going to happen due to Russia's hostile move on Ukraine, you would get $108,000 for living in Moscow.
It's a big old world out there, so chances are good that your work could take you someplace other than Italy or the other just-cited higher cost of living locales.
In those cases, check out the notice's full table (about 5½ PDF pages in the IRS notice) to see how the housing costs, and their tax considerations, in your potential new home abroad compare to U.S. residential expenses.
You also might find these items of interest:
- Airbnb to pay $628 million to settle Italian tax dispute
- A global wealth tax on billionaires would bring in $250B a year, says EU tax group
- Report predicts $4.7 trillion in global tax avoidance and evasion losses over next decade
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