US Expat Taxes for Americans Living in Guatemala – What You Need to Know
It has been estimated that there are 6,500 Americans living in Guatemala.
Living in Guatemala is an amazing experience for a variety of reasons, including the culture, the natural environment, the friendly locals, and the pre-Columbian ruins. As an American expatriate living in Guatemala though, what exactly do you need to know regarding filing US expat (and Guatemalan) taxes?
All US citizens and green card holders who earn a minimum of around $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 Guatemala, 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.
“Neither residents nor non-residents pay tax on non-Guatemalan earnings.”
If you pay income tax in Guatemala, there are several exemptions that allow you to pay less or no US income tax on the same income to the IRS. The main exemptions are 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 Guatemalan resident, and the Foreign Tax Credit, which gives you a $1 tax credit for every dollar of tax you’ve paid in Guatemala. 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 Guatemalan governments share taxpayer info, and Guatemalan 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/Guatemalan dual citizen, and you have been living in Guatemala 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.
Guatemalan taxes – what you need to know
Foreigners living in Guatemala are considered a resident for tax purposes if they spend a total of 183 days in Guatemala in a year. Residents (and non-residents) are taxed solely on their Guatemala-sourced income on a scale from 5% to 7%. There is also a 4.83% social security tax on employment income.
The Guatemalan tax year is the same as the American, which is to say the tax year. Tax returns are due by March 31st. The Guatemalan tax authority is called SAT (the Superintendencia de Administración Tributaria).
We strongly recommend that if you have any doubts or questions about your tax situation as a US expat living in Guatemala that you contact a US expat tax specialist.