It has been estimated that there are several thousand Americans living in Ireland.
Living in Ireland is an incredible experience for a number of reasons, including the friendly locals, the incredible landscapes, the charming culture, not to mention easy access to the rest of Europe. As an American expatriate living in Ireland though, what exactly do you need to know regarding filing US expat (and Irish) taxes?
All US citizens and green card holders who earn more than $12,550 (in 2021, or just $400 of self-employment income or just $5 if you’re married to a foreigner) 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 where their income originates.
The good news is if you are paying income tax in Ireland, 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 earned more than US$12,550 (in 2021, or $400 of self-employment income etc), you are required to file Form 1040. While taxes are still due by April 15, expats get an automatic filing extension until June 15, which can be extended further online until October 15.
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.
“Irish residents who have no income or gains other than employment income subject to withholding Pay-As-You-Earn (PAYE) tax are generally not required to submit a tax return.” – KPMG
If you pay income tax in Ireland, 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 Irish resident, and the Foreign Tax Credit, which gives you a $1 tax credit for every dollar of tax you’ve paid in Ireland. These exemptions can be combined if necessary.
The US and Irish governments share taxpayer info, and Irish 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/Irish dual citizen, and you have been living in Ireland 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.
Irish taxes – what you need to know
Irish residents are taxed on their worldwide income at 20% for the first around $35,000, and at 40% on their income above this figure. Residents also pay a social security tax (called Universal Social Charge) of between 1% and 8%, depending on their income.
Foreigners living in Ireland are considered a resident for tax purposes if they spend over 183 days a year in Ireland in a tax year, or, if they spend 280 days in Ireland in two consecutive years they are considered a resident for tax purposes in the second year.
The Irish tax year is the same as the US, which is to say the calendar year. If you’re employed by a Irish firm, they will deduct tax at source and your aren’t require to file an Irish tax return. Tax returns are due by October 31. The Irish tax authority is simply called the Revenue.
We strongly recommend that if you have any doubts or questions about your tax situation as a US expat living in Ireland that you contact a US expat tax specialist.