US Expat Taxes for Americans Living in Brazil – What You Need to Know
There are an estimated 70,000 Americans living in Brazil.
There are plenty of reasons why so many Americans love living in Brazil, the lifestyle, the beaches, and the laid back culture to name but a few. As an American expatriate living in Brazil though, what exactly do you need to know regarding filing US expat (and Brazilian) taxes?
All US citizens and green card holders who earn a minimum of $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 Brazil, 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 over US$10,000 (or just $400 of self-employment income), wherever the income originates in the world you have to file IRS form 1040.
While any US taxes due are still due by April 15th, expats get an automatic filing extension until June 15th, which can be extended further on request until October 15th.
If you have overseas assets worth over US$200,000 per person, excluding your home if it is owned in your own name, you also have to file form 8938 to declare them.
If you had a total of at least US$10,000 in one or more foreign bank and/or investment accounts at any time during the tax year, you also have to file FinCEN form 114, otherwise known as a Foreign Bank Account Report or FBAR.
“There is no provision for an individual to obtain an extension of time for filing the return. Late filed returns are subject to penalty and interest. Any balance due with the annual tax return must be paid on 30 April.” – KPMG
If you pay income tax in Brazil, there are several exemptions that allow you to pay less or no US income tax on the same income to the IRS. The main one is the Foreign Earned Income Exclusion, which lets you exclude the first around US$100,000 of foreign earned income from US tax if you can prove that you are a Brazilian resident, and the Foreign Tax Credit, which gives you a $1 tax credit for every dollar of tax you’ve paid in Brazil. These exemptions can be combined if necessary. Remember 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 return.
The US and Brazilian governments share taxpayer info, and Brazilian banks pass on US account holders’ account info to the IRS, so it’s not worth not filing or omitting anything on your return. The penalties for incorrect or incomplete filing for expats are steep to say the least.
If you’re a US citizen, green card holder, or US/IBrazilian dual citizen, and you have been living in Brazil but you didn’t know you had to file a US tax return, don’t worry: there’s a program called the IRS Streamlined Procedure that allows you to catch up on your filing without paying any penalties. Don’t delay though, in case the IRS comes to you first.
Brazilian taxes – what you need to know
Brazilian residents pay income tax on their worldwide income. A resident is defined as someone with a permanent visa, a temporary visa, or if they spend a minimum of 183 days in Brazil in the tax year.
Brazil’s income tax rates rise from 0% to 27.5%, depending on your income. There is also a social security tax on Brazilian employment income which ranges 7.64% to 11%.
The Brazilian tax year is the same as in the US. Brazilian tax returns are due by April 30th. The Brazilian tax authority is called the Receita Federal do Brazil.
There is no wealth tax, but there’s a capital gains tax which is in most cases 15%.
We strongly recommend that if you have any doubts or questions about your tax situation as a US expat living in Brazil that you contact a US expat tax specialist.