USA Tax for Israelis
Americans Living in Israel Must File US Income Tax Returns – USA tax for Israelis
Most Israelis don’t worry about filing Israeli tax returns unless they own their own businesses. Almost all US citizens and permanent residents, however, must file annual US income tax returns, and US tax returns can be quite complex. The bad news is that US citizens and permanent residents who live in Israel and earn no income in the United States, more likely than not, must still file US tax returns. This doesn’t mean they owe US taxes, but failure to file can affect eligibility for US benefits, including the immigration of an alien spouse or children.
Israelis who earn less than the equivalent of $100,000 per year ($200,000 if filing jointly) must only file the standard IRS form 1040, 1040b (dividends and interest) and Form 2555, which exempts the first $100,000 of income from Israel from US taxes. For those earning in excess of $100,000, the filing requirements become more complex. It still doesn’t mean Israelis owe US taxes, but now the actual Israeli taxes must be accounted for on the US filing.
Bank Account Reports
Far more burdensome, however, is the annual filing of the FBAR, Report of Foreign Bank and Financial Accounts. If a US citizen or permanent resident living in Israel maintains a bank account or an investment in excess of the equivalent of $10,000 anytime during the year, they must file this report. The report includes information about the nature of the account, the number, the bank, etc. Israeli banks are becoming more reticent about having US citizens maintain accounts in their banks because of the severity of penalties against the bank by the United States government for non-compliance of its account holders to make these reports. In addition, a late filing by a US citizen or permanent resident can trigger significant fines against the person.
High Sums of Income
If the US citizen or permanent resident has accounts in excess of $200,000 ($400,000 if filing jointly), they must file a separate form in addition to the FBAR. In these cases, it’s possible the asset holder will owe US taxes.
Cohen, Decker, Pex & Brosh law offices can file all of these forms for any US citizen or permanent resident living in Israel. For most Israelis, the fees are nominal.
If you have questions about USA income taxes for US citizens or permanent residents living in Israel, please contact Advocate James Cohen – USA tax for Israelis