U.S. TAX GUIDE IN BRAZIL
Who needs to file a US tax return in Brazil?
US citizens and Green Card holders living in Brazil are required to file a US tax return if their worldwide income exceeds specific thresholds.
It’s important to remember that this requirement includes worldwide income, not just income from the US or Brazil.
Table of Contents
What are the filing thresholds for 2023 and 2024?
The filing thresholds vary based on your filing status. Below are the thresholds for the tax years 2023 and 2024:
Filing Status | 2023 Threshold | 2024 Threshold |
Single (under 65 years) | US$13,850 | US$14,600 |
Married Filing Jointly | US$27,700 | US$29,200 |
Married Filing Separately | US$5 | US$5 |
Head of Household | US$20,800 | US$21,650 |
Does this include worldwide income?
Yes, these thresholds apply to worldwide income. This means all income from all over the world must be considered, not just income from the US or Brazil.
What if I’m married to a non-US person?
If you’re married to a Brazilian national or any non-US person, your filing status is likely to be “Married Filing Separately.” In this case, even if you have as little as US$5 of worldwide income, such as bank interest, you are required to file a US tax return.
What if my spouse is a US person?
If you and your spouse are both US persons (US citizens or green card holders), you will likely file “Married Filing Jointly,” which has a higher threshold of US$27,700 in 2023 and US$29,200 in 2024.
What if I’m single?
If you are single and under 65 years old, you need to file a tax return if your gross income is at least US$13,850 in 2023 or US$14,600 in 2024.
What if I have dependents or young children?
If you have dependents or young children at home, you might qualify for the “Head of Household” filing status, which has different filing thresholds and could offer tax benefits. For 2023, the threshold is US$20,800 and for 2024, it is US$21,650.
What are the usual forms I need to submit to the IRS from Brazil?
US expats in Brazil may need to submit several forms to the IRS to report their income, foreign accounts, and other financial information, depending on their situation, such as:
- Form 1040: The standard US individual income tax return.
- Form 2555: To claim the Foreign Earned Income Exclusion (FEIE).
- Form 1116: To claim the Foreign Tax Credit (FTC).
- Form 8938: Statement of Specified Foreign Financial Assets (required under FATCA).
- FBAR (FinCEN Form 114): To report foreign bank accounts if their aggregate value exceeds US$10,000 at any time during the year.
- Form 5471: Information Return of US Persons With Respect to Certain Foreign Corporations (if you own more than 10% of a foreign corporation).
- Form 8865: Return of US Persons With Respect to Certain Foreign Partnerships (if you are a partner in a foreign partnership).
- Form 8858: Information Return of US Persons With Respect to Foreign Disregarded Entities and Foreign Branches.
About the FEIE and FTC, which is better if I’m living in Brazil?
When living in Brazil as a US expat, you have two main methods to avoid being taxed twice: the Foreign Earned Income Exclusion (FEIE) and the Foreign Tax Credit (FTC). Deciding which option is better depends on your income, tax rates, and overall financial situation.
First, let’s talk about what the FEIE and FTC are.
The Foreign Earned Income Exclusion allows you to exclude a certain amount of your foreign-earned income from US taxation.
For 2024, you can exclude up to US$126,500 of your foreign-earned income. This exclusion applies only to money you earn from working, like wages and salaries, not to passive income like interest or dividends.
The Foreign Tax Credit lets you reduce your US tax bill by the amount of tax you’ve already paid to Brazil on the same income. This credit applies to various types of income, not just earned income.
For most US expats living in Brazil, the Foreign Earned Income Exclusion (FEIE) is generally the better option. Here’s why:
- Simpler Filing Process:
• The FEIE simplifies your tax return by allowing you to exclude your foreign-earned income directly, reducing the complexity of your tax filing process. - High Exclusion Limit:
• With the exclusion limit set at US$126,500 for 2024, many expats can exclude a significant portion, if not all, of their earned income. - Beneficial for Moderate Incomes:
• For those with moderate incomes, the FEIE can effectively reduce their taxable income to zero, making it a highly efficient way to avoid double taxation.
What are the popular deductions I can take as a US expat living in Brazil?
- Foreign Earned Income Exclusion (FEIE): Allows you to exclude up to US$126,500 of foreign-earned income from US taxation.
- Foreign Tax Credit (FTC): Allows you to claim a credit for taxes paid to the Brazilian government, reducing your US tax liability.
- Housing Exclusion or Deduction: If you qualify for the FEIE, you may also be able to exclude or deduct certain housing expenses, such as rent, utilities, and insurance.
- Standard Deduction: An automatic deduction that varies based on your filing status (e.g., US$14,600 for single filers in 2024).
- Itemized Deductions: If your itemized deductions exceed the standard deduction, you can deduct expenses such as mortgage interest, medical expenses, and charitable contributions.
- Student Loan Interest Deduction: You may be able to deduct up to US$2,500 of interest paid on student loans.
- Contributions to Retirement Accounts: Contributions to certain retirement accounts, such as IRAs, may be deductible.
