US Taxes for American Expats in Amsterdam – Everything You Need to Know
Amsterdam is one of the most popular destinations in Europe for US expats, with an estimated 30,000 Americans living there. It’s no surprise, as Amsterdam is a great place to live. Its culture, architecture, canals, and great quality of live all mean Americans expats in Amsterdam enjoy a truly enriching experience.
Unfortunately for Americans living in Amsterdam though, US expats in Amsterdam are required to file both US taxes as a US citizen, and Dutch taxes as a Dutch resident.
Filing both tax returns needn’t be as much hassle as many American expats living in Amsterdam first assume however. Most in fact end up not owing the IRS anything (although they do still have to file).
Dutch taxes in brief
For US expats whose only income is from employment in the Netherlands, Dutch income tax is deducted at source and there’s no need to file a Dutch tax return.
The Dutch tax year is the same as in the US, Jan 1st to December 31st. For those who do have to file a Dutch tax return, Dutch returns are due by May 1st.
Dutch tax returns are filed to the Dutch equivalent of the IRS, the Belastingdienst.
US taxes for expats
Expats have an automatic extension until June 15th to file their US tax return, with a further extension available upon request until October 15th. Any tax owed is still due by April 15th though.
While it’s always necessary to file, there are several exclusions that expats can claim that will reduce almost every expat’s US taxes owed to zero.
If expats living and working in Amsterdam pay more in Dutch income tax than the US tax they owe (which most will), it’s often more beneficial for them to claim the Foreign Tax Credit.
“A recent HSBC survey ranked the Netherlands as the sixth-best place in the world to be an expat, citing the duration respondents stay in the country and their ability to earn and save.” – the BBC
The Foreign Tax Credit offers US expats a $1 tax credit for every US dollar equivalent of tax that they’ve paid abroad. For expats in Amsterdam paying more Dutch tax than they owe to the IRS, this means that they can claim more US tax credits than the US tax that they owe, eradicating their US tax liability while giving them excess US tax credits that may come in handy in the future. Expats can claim the Foreign Tax Credit by filing form 1116 with their annual federal return.
For any US expats earning under around $100,000 and paying less Dutch tax than the US tax due, the Foreign Earned Income Exclusion is often a better option.
The Foreign Earned Income Exclusion lets expats who can prove that they are either permanent residents in the Netherlands, or that they spent at least 330 days outside the US in the year, exclude the first around $100,000 of their income from US taxes.
The Foreign Earned Income Exclusion can be claimed by filing form 2555.
Further US filing requirements for expats in Amsterdam
As well as filing a federal tax return, US expats in Amsterdam who have more than $10,000 in total in foreign bank or investment accounts (including any account that they have control or signatory authority over) at any time during the tax year are required to file an FBAR (Foreign Bank Account Report). Filing an FBAR means filing FinCEN form 114 online before October 15th.
Because FBARs are filed to FinCEN rather than to the IRS, the penalties for not filing are much higher, so it’s important not to neglect FBAR filing, especially as almost all foreign banks and investment firms now provide the IRS with information about their US account holders directly.
Expats living in Amsterdam with financial foreign assets (but not tangible physical assets such as property, or cars for example) worth over $200,000 at any time during the tax year are required to report them by filing FATCA (The Foreign Asset Tax Compliance Act) form 8938 with their federal return.
Expats living in Amsterdam who need to catch up with their US tax filing
Expats who have been living in Amsterdam for a while but who didn’t know that they have to file US taxes can catch up with their US tax filing under an IRS amnesty program that means they won’t face any penalties.
The program is called the Streamlined Procedure, and to qualify you have to file your last 3 tax returns, your last 6 FBARS (if required), pay any back taxes that you owe (often none, once you’ve claimed the most beneficial exclusions given your circumstances), and self-certify that your previous failure to file was non-willful.
The Streamlined Procedure is a great opportunity for expats living in Amsterdam who are behind with their US tax filing to become compliant before the IRS comes to them.