From Stockholm to Gothenburg, Sweden is an increasingly popular destination for US expats. However, US expats living in Sweden are required to file US taxes every year. In addition, to penalties and interest, the US now has the right to revoke a US citizen’s passport for failure to file or failure to pay their US taxes. This is becoming an incentive for US citizens living in Sweden to become current with their taxes, and file every year.
The US offers both the Foreign Tax Credit and the Foreign Earned Income exclusion to help reduce the tax liability for those citizens who are living abroad. The Foreign Earned Income Exclusion allows the first $100,000 of income earned outside of the US to be excluded from income, and therefore not taxed by the US government. The Foreign Tax Credit ensures that US citizens are not being taxed twice on money which was already taxed by the Swedish Government. In most cases Sweden’s tax rate is higher than the tax rate of the US, and therefore US citizens living in Sweden can use the Foreign Tax Credit to reduce or eliminate their US tax bill.
US Sweden Tax Treaty
The US Sweden Tax treaty between the IRS and the Swedish tax agency also helps limit dual taxation between the two countries. It is important to hire an tax professional who is familiar with the US/Sweden Tax Treaty.
In addition, US citizens living in Sweden are required to file the FBAR. The FBAR, or Foreign Bank Account Report, must be filed by any US citizen with a over $10,000 in aggregate in foreign financial institutions and as foreign banks.
If you are a US Citizen living in Sweden and have any questions about your US taxes, feel free to send us an email at firstname.lastname@example.org.