If you’re a U.S. citizen living abroad for long enough, then you might be familiar with how you still need to pay U.S. taxes and how you can often take advantage of the Foreign Tax Credit to reduce your U.S. tax burden by the amount paid in taxes in the foreign country where you live. Moving to another country might have been a decision you made for family, for business, or just for personal reasons. If you’ve been thinking about moving back to the States, you might now be wondering whether there are any good tax incentives to draw you back.
Overall, you should be able to take advantage of most of the same tax incentives (credits, deductions, etc.) while living abroad as you can by moving back to the United States. All in all, there are not too many tax incentives that require you to be actually present in the U.S. However, when it comes to state taxes, some states are starting to create more and more tax incentives to try to get people to move there, whether you’re moving from another state or coming back to the States from living abroad.
Contact US Tax Help for a review of your tax situation by contacting our tax accountants for Americans living abroad at (541) 362-9127.
Are There Tax Incentives for Federal Taxes if I Move Back to the U.S.?
In general, the tax credits and deductions that you can claim as a U.S. citizen mostly follow you no matter where you live. Federal taxes are, more or less, applied equally across the country (and beyond, in the case of U.S. citizens living in foreign countries). Instead of worrying so much about your geographic location, U.S. federal taxes primarily look at your money and how it was earned and taxed. This means that, all in all, there are not too many tax incentives our tax accountants can use to help you as you move back to the United States.
While living abroad, the taxes you pay to a foreign country should be accounted for by the Foreign Tax Credit. While there are limits to this credit, it can ultimately reduce your tax bill when it comes to U.S. taxes. However, it does not really do much to lower your ultimate tax bill since the U.S. taxes are only reduced by the amount you’re still paying to another government. If you move back to the United States and your income doesn’t change, then you’ll still ultimately be baying a similar total in taxes; it’s just that the full value will go to the U.S. government rather than splitting your taxes to different governments.
Tax Incentives for Moving to the United States
One interesting tax incentive that you used to be able to take advantage of was the ability to deduct moving expenses related to moving to or from the United States. Formerly, this would help people moving back to the U.S. claim a deduction for the cost of packing up, getting on a plane, and moving back home to the States. However, this tax incentive is no longer allowed for the majority of people – at least through 2025.
The IRS stopped this tax program for years after 2017, meaning that the average U.S. citizen can no longer deduct moving expenses for moving back to the United States. Instead, this deduction is limited just to particular armed services members who are moved for work.
However, the current rule is only in place until 2025, so it is possible it could change in the future.
Tax Incentives to Move Back to Particular States and Cities in the U.S.
While the U.S. government might not have much by way of tax incentives for moving back here, there are plenty of tax incentives being offered by various states and cities. Many of these incentives are subject to change, so make sure that you talk to your accountant about your options and whether these incentives are still available to you.
Some of the available tax incentives for moving to certain states include tax breaks for student loan payments. If you’re a recent graduate or otherwise still paying off your student loans, moving to certain states (e.g., Maine) could be beneficial when it comes to tax breaks for loan payments. Some specific towns and cities are also putting forth incentives related to student loans for people who move there.
Other states are giving stipends and tax breaks for people who relocate there or who are new hires at jobs in the area. Many of these incentives are not even tax incentives, and some are practically cash offers. Make sure to talk to your accountant about these options, especially if you are planning on moving back to the United States but aren’t sure where you’d like to end up.
Tax Incentives for Moving Businesses Back to the United States
The reason that many people and businesses move away from the U.S. is because of tax incentives in other countries. Manufacturing costs in Mexico or other countries overseas could potentially be lower in part because of the way that manufacturing is taxed, let alone the lower cost of labor in those countries. Especially when it comes to fostering economic development and growth, the United States often has many programs on the horizon to try to bring manufacturing and other businesses back to the U.S.
Our accountants primarily work with individual taxpayers rather than corporations and businesses, but we understand that tax advice often encompasses more than what our clients are paying in individual taxes. Our accountants can look into current and proposed tax measures and help you take those into account when it comes time to consider moving.
Call Our Tax Accountants for U.S. Citizens Living Abroad
For help with your taxes, call our tax accountants at US Tax Help at (541) 362-9127.
