2021 Tax Update for U.S. Expats: What You Need to Know

The Coronavirus pandemic has had global repercussions which will continue well past 2020.
Its far-reaching effects mean that filing taxes for U.S. expats in the 2021 tax season will differ from prior years, as the IRS and other government agencies have rolled out various COVID-19 relief options and requirement waivers for certain tax benefits.

As an expat living and working abroad you probably have many questions and concerns about how all of these major changes will affect your U.S. taxes this year – we have outlined below a brief summary of the major changes which will directly impact U.S. expats this filing season.

I Didn’t Receive My Stimulus Payments – Is It Too Late to Claim Them?

No, you’re in luck – if you are eligible to qualify to receive the stimulus payments based on your 2020 income and filing status, the IRS has provided another way for you to claim the payments, called the Recovery Rebate Credit. This is a tax credit available on your 2020 tax return. When you file you will receive the credit as a refund once you file your 2020 return.

My Time Abroad in 2020 Was Disrupted by Coronavirus Travel Restrictions – Can I Still Claim the Foreign Earned Income Exclusion and Foreign Housing Exclusion on My 2020 Return?

You still may qualify!
Normally a taxpayer abroad must have a permanent home in a foreign country and pass 1 of 2 tests – either the Bona Fide Residence Test or the Physical Presence Test – in order to claim either of the exclusions. To qualify for the Bona Fide Residency Test, a taxpayer must have established a tax home in a foreign country and have lived there for an uninterrupted 12-month period including an entire tax year. For the Physical Presence Test, a taxpayer must have resided in a foreign country or countries for 330 full days during a consecutive 12-month period.
The Coronavirus travel restrictions caused major disruptions for many U.S. expats during 2020 – closed borders, travel bans and quarantines imposed by many countries stranded some expats in their country of residence or forced them to move back to the U.S. unexpectedly or cancel travel plans.
However affected U.S. expats are in luck – the IRS is providing relief to them, by waiving the time requirements on their 2020 returns to qualify for the Foreign Earned Income Exclusion and the Foreign Housing Exclusion under either test.
An affected U.S. expat can qualify for this Coronavirus-related waiver of time requirements to qualify for the Foreign Earned Income Exclusion and Foreign Housing Exclusion if:

•He or she was required to leave China, Hong Kong, or Macau between December 1, 2019, and July 15, 2020, or
•He or she was living abroad in another country and was required to leave between February 1, 2020, and July 15, 2020
To claim the waiver, “Revenue Procedure 2020-27” must be written in the top margin of the form completed to qualify for the Foreign Earned Income Exclusion and Foreign Housing Exclusion, Form 2555, included in the 2020 return.
What is the Maximum Foreign Earned Income Exclusion in 2020? Will It be Increased for 2021?

The maximum amount of Foreign Earned Income Exclusion which a qualified U.S. expat may claim on his or her return for tax year 2020 is $107,600, and for tax year 2021, it will be $108,700.
What Will My Standard Deduction Amount for My Filing Status Be on My 2020 Return? Will It Be Increased for 2021?

For the 2020 tax year, the Standard Deduction amounts are as follows: $24,800 for married joint filers, $12,400 for single filers and married separate filers, and $18,650 for head of household filers. For the 2021 tax year, the Standard Deduction amounts will be increased to $25,100 for married joint filers, $12,550 for single filers and married separate filers, and $18,800 for head of household filers.

What Other Changes Might Impact Me as a U.S. Expat for 2021?

If you have a non-citizen spouse and are planning to make a gift to him or her during 2021, the annual exclusion from income for gifts made to non-citizen spouses will be $159,000 (up from $157,000 for 2020).
Let us know if you have any questions about how these changes will affect your 2020 US taxes!