If I Pay Taxes in the Usa Do I Have to Pay Again in New Zealand
US Expat Taxes for Americans Living in New Zealand – What You Need to Know
11/22/2021
There are an estimated 25,000 Americans living in New Zealand.
Living in New Zealand is an incredible experience for a variety of reasons: the famous landscapes, the friendly people, and the food to name merely a few. Every bit an American expatriate living in New Zealand though, what exactly do you demand to know regarding filing US expat (and New Zealand) taxes?
All Us citizens and greenish card holders are required to file a U.s.a. federal taxation return and pay taxes to the IRS, regardless of where in the globe they live or their income is generated.
The practiced news is if you are paying income taxation in New Zealand, there are various exclusions and exemptions available to forestall you paying tax on the same income to the IRS, too.
US taxes – what you need to know
If your almanac income is more than $12,400 (in 2020, or $12.550 in 2021), or just $400 for cocky-employed individuals, or just $5 for Americans married filing separately with a greenhorn, then you have to file grade 1040. While whatever tax owed is still due on April 15th, expats get an automated filing extension upward until June 15th. This can be extended farther until October 15th.
If you have foreign avails worth more than than United states$200,000 (per person), excluding your home if it is endemic in your ain name, you must also file Form 8938 to declare them.
If y'all had a total of at least US$10,000 in one or more than foreign accounts at any time during the tax year, you lot must also file FinCEN course 114, otherwise known as a Strange Banking company Account Report or FBAR.
Thankfully, there are several exemptions yous can merits that let yous to pay less or no Us income taxation to the IRS.
"If you are a resident of New Zealand for tax purposes, you volition be taxed in New Zealand on all of your worldwide income".
– The Inland Revenue Department
The two principal ones are the Strange Earned Income Exclusion, which allows you to exclude the first around United states of america$110,000 of your foreign earned income from US tax if you can demonstrate that you are a New Zealand resident, and the Strange Tax Credit, which gives you a dollar tax credit for every dollar of tax that yous've already paid in New Zealand.
The Strange Revenue enhancement Credit is typically a better option if y'all pay more tax in New Zealand than you would owe in the Usa, as you can behave the excess tax credits forward for hereafter use.
The The states – New Zealand Revenue enhancement Treaty
The United States – New Zealand Taxation Treaty covers double taxation with regards to income tax, corporation tax, and capital gains revenue enhancement, still, a clause called a savings clause in Commodity 1 paragraph 3 states that "the United States may tax its citizens and U.s.a. companies every bit if the Convention had not come into result." This ways that United states expats however have to file US taxes on their global income.
However, the treaty allows US expats to avert double taxation on their income earned in New Zealand by letting them claim The states revenue enhancement credits when they file their Us tax return to the aforementioned value equally New Zealand income taxes that they've already paid, when they file their United states of america revenue enhancement return.
For income earned (and and so taxed first) in the U.s., the treaty allows Americans in New Zealand to merits New Zealand credits to the value of the The states tax paid on this income, although they may have to pay some extra New Zealand tax on meridian, the New Zealand tax rates being higher than the US.
To claim US tax credits confronting New Zealand taxes paid, expats must file Grade 1116 when they file their federal taxation return.
Past doing this, the vast majority of Usa expats in New Zealand won't terminate up owing any United states of america income tax, as New Zealand has higher income taxation rates than the United states of america.
The US – New Zealand Tax Treaty besides allows the New Zealand government to share U.s.a. expats' New Zealand tax data with the IRS, too as their New Zealand bank and investment business relationship details and balances.
Some Americans in New Zealand volition benefit from the treaty though, for instance artists, teachers, athletes, students, too every bit expats receiving dividends, interest, royalties, and pension income.
Expats with these types of income should consult a U.s.a. expat revenue enhancement specialist to check. Expats who tin can claim a provision in the treaty should do so past filing IRS Grade 8833.
New Zealand taxes – what you lot need to know
New Zealand residents are taxed on their worldwide income. Tax rates range from x.five% to 33% (you tin can find New Zealand tax information for expats here).
Americans are considered residents in New Zealand for revenue enhancement purposes if they have a permanent identify of abode in New Zealand, or if they spend at least 183 days or role-days in the state in a 12 month menstruum.
New Zealand'due south tax authority is called the IRD (Inland Revenue Department). The tax yr in New Zealand runs from Apr 1st to March 31st. If your but income source is employment in New Zealand, taxation will be deducted at source and you don't accept to file a return. If you practice file a return, it is due on July seventh. The form is called IR3, and you lot tin can download it and find out more than about information technology here.
Other than income and business organisation taxes, in that location are relatively few taxes in New Zealand – no local or land taxes, no inheritance revenue enhancement, and only majuscule gains taxes on some asset disposals.
Catching upward
Expats in New Zealand who are backside with their US revenue enhancement filing because they were unaware that they had to file from abroad tin can catch up without facing penalties under an IRS amnesty program chosen the Streamlined Process, and then long as they do so before the IRS contacts them about it.
We strongly recommend that if yous take any doubts or questions most your tax filing situation as a Us expat living in New Zealand that you contact a United states of america expat tax specialist.
Source: https://brighttax.com/blog/us-expat-taxes-americans-living-new-zealand/
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