How the New US Tax Reform Affects American Professionals Living in HK

The Tax Cuts and Jobs Act, a new U.S. tax reform that took effect for the 2018 tax year, was signed into law in December 2017. The American tax system saw considerable modifications as a result of this reform, including adjustments to tax rates, deductions, and credits. As a result, the modifications may have distinct effects on American tax for US residents living Hong Kong.

The new tax law's increase in the standard deduction is one of its most important adjustments. By using the standard deduction rather than itemising their deductions, more people will be able to reduce their tax burden.

The new tax reform makes adjustments to the taxation of overseas income as well. American expatriates may use the foreign earned income exclusion (FEIE) to deduct up to $101,300 of their overseas earned income from U.S. taxes under the prior tax system. The new tax law maintains the FEIE but adds a new restriction to the foreign tax credit that might lead to higher taxes for expats with sizable overseas income.

An additional 20% pass-through deduction for company income is part of the recent tax overhaul. For American expats who own a business or have a stake in one, this new deduction may offer a sizable tax benefit. The availability of the deduction for some expats may be impacted by the new limits and limitations on who may claim it that are part of the new tax reform.

The new Base Erosion Anti-Abuse Tax (BEAT) is among the most significant reforms that might have an impact on American expats in Hong Kong. This is a new minimum tax that is imposed on specific big firms and corporations. The BEAT is designed to stop businesses from moving their earnings to low-tax nations in order to reduce their tax obligations in the United States. This new tax may apply to American expats who own or have a stake in a company that is subject to the BEAT.

As a result of the recent U.S. tax overhaul, the country's tax laws have undergone substantial changes that may have a variety of effects on Americans living abroad in Hong Kong. The rise in the standard deduction and the child tax credit may be advantageous to certain expats, while the changes to itemised deductions or the new cap on the foreign tax credit may be detrimental to others. To determine how the new tax reform may affect them and to make sure they comply with all relevant U.S. tax rules and regulations, American expats should speak with a tax expert.

USA Expat Taxes specialises in assisting Americans who are living abroad to understand and adhere to U.S. tax laws. In addition to drafting and submitting US tax returns, we also offer tax planning and counselling services and defend clients in IRS audits and appeals. Additionally, we provide financial planning, accounting, and bookkeeping services, as well as support with adhering to international tax rules. The staff at USA Expat Taxes is made up of seasoned tax experts, including enrolled agents (EAs) and certified public accountants (CPAs), who are knowledgeable about the specific tax problems that American expats face.