Tax Implications of Short-Term Visits to the US for Expats

For the American Expats living abroad, short-term visits to the US can have tax implications. Many US expats assume that living abroad relieves them of certain tax responsibilities; even brief visits can impact their US tax situation.

Here are some key considerations for the expats making short trips back to the United States.

1. Substantial Presence Test: One of the most important factors for determining the tax obligations of an expat is the substantial presence test. The IRS uses this test to determine whether the expat is considered a US resident for tax purposes. The test takes into account-

• All the days the expat is physically present in the US during the current year.
• One-third of the days the expat was present in the US during the previous year.
• One-sixth of the days the expat was present in the US during the second year before the current one.

If the calculation totals 183 days or more over three years, the expat may be considered a US resident for tax purposes which could subject them to US taxes on their global income for that year.

2. Impact on FEIE: The FEIE or the Foreign Earned Income Exclusion allows the American Expats to exclude up to $ 126, 500 of the foreign earned income from US taxes in 2024. The short-term visits to the US could affect their eligibility for this exclusion. To qualify for FEIE, the expat must pass the physical presence test or the Bona Fide Residence Test.

• The physical presence test requires that the expat spend 330 full days outside the US in twelve months.
• The Bona Fide test requires the expat to establish a permanent residence in a foreign country for an entire tax year.

3. State Tax Considerations: Apart from the federal taxes the expats are subject to the state taxes, particularly if they maintain residency in a state like New York or California. A short visit to the US can trigger the state residency rules, especially if the ex-pats still have ties such as property ownership, voter registration, or driver’s licenses. If the home state of the expat considers them a resident for tax purposes, they might be required to file a state tax return and pay state income taxes on their global earnings.

How do expats reduce US tax exposure during their short visits to the US?

The US ex-pats can avoid triggering additional tax liabilities during short visits to the US by-.

• Keeping a precise record of their time spent in the US to ensure they do not exceed the thresholds that trigger tax residency.
• By limiting the number of days they spend in the US every year to maintain eligibility for FEIE and avoid complications with state laws.

It is advisable to consult an experienced expat tax advisor to help you navigate the complexities of the US expat taxes, remaining compliant while reducing their tax obligations.