US Expat Taxes for Americans Living in New Zealand – What You Need to Know
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 but a few. As an American expatriate living in New Zealand though, what exactly do you need to know regarding filing US expat (and New Zealand) taxes?
All US citizens and green card holders who earn over $10,000 (or just $400 for self-employed individuals) anywhere in the world are required to file a US federal tax return and pay taxes to the IRS, regardless of where in the world they live or their income is generated.
The good news is if you are paying income tax in New Zealand, there are various exclusions and exemptions available to prevent you paying tax on the same income to the IRS, too.
US taxes – what you need to know
If you earn a minimum of US$10,000 (or $400 if you’re self-employed), you are obliged to file form 1040. While taxes are still due by April 15th, expats get an automatic filing extension until June 15th, which can be extended further online until October 15th.
If you have foreign assets worth more than US$200,000 (per person), excluding your home if it is owned in your own name, you must also file Form 8938 to declare them.
If you had a total of at least US$10,000 in one or more foreign accounts at any time during the tax year, you must also file FinCEN form 114, otherwise known as a Foreign Bank Account Report or FBAR.
“If you are a resident of New Zealand for tax purposes, you will be taxed in New Zealand on all of your worldwide income”.
– The Inland Revenue Department
If you pay income tax in New Zealand, there are several exemptions that allow you to reduce or avoid paying tax on the same income to the IRS as well.
The two primary exemptions are the Foreign Earned Income Exclusion, which allows you to exclude the first around US$100,000 of foreign earned income from US tax if you can demonstrate that you are a New Zealand resident, and the Foreign Tax Credit, which gives you a dollar tax credit for every dollar of tax that you’ve already paid in New Zealand. The two can be combined, if this is the best option for your individual situation. Be aware though that even if you don’t owe any tax to the IRS, if your income is over US$10,000 (or $400 if you’re self-employed) you still have to file a federal tax return.
The US and New Zealand governments share taxpayer information, while New Zealand banks pass on US account holders’ account information to the IRS, so it’s not worth sticking your head in the sand or not fully disclosing your situation on your return. The penalties for tax evasion for expats are stringent, to say the least.
If you’re a US citizen, green card holder, or US/New Zealand dual citizen, and you have been living in New Zealand but you didn’t know you had to file a US tax return, it’s OK: there’s a program called the IRS Streamlined Procedure which allows you to get up to date with your filing without facing any penalties. Don’t delay though, as it may not be an option if the IRS finds you first.
New Zealand taxes – what you need to know
New Zealand residents are taxed on their worldwide income. Tax rates range from 10.5% to 33% (you can find New Zealand tax information for expats here).
Americans are considered residents in New Zealand for tax purposes if they have a permanent place of abode in New Zealand, or if they spend at least 183 days or part-days in the country in a 12 month period.
New Zealand’s tax authority is called the IRD (Inland Revenue Department). The tax year in New Zealand runs from April 1st to March 31st. If your only income source is employment in New Zealand, tax will be deducted at source and you don’t have to file a return. If you do file a return, it is due on July 7th. The form is called IR3, and you can download it and find out more about it here.
Other than income and business taxes, there are relatively few taxes in New Zealand – no local or state taxes, no inheritance tax, and only capital gains taxes on some asset disposals.
We strongly recommend that if you have any doubts or questions about your tax filing situation as a US expat living in New Zealand that you contact a US expat tax specialist.