U.S. TAX GUIDE IN INDIA
How can US expats in India claim the 2021 stimulus payment?
US citizens, including those with dual US and Indian citizenship who live in India, can still claim the third stimulus payment, also known as the Recovery Rebate Credit. This payment is worth US$1,400 per eligible individual.
To claim it, you must file your 2021 tax return by April 18, 2025.
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What are the qualifications for the 2021 stimulus payment?
To qualify for the US$1,400 Recovery Rebate Credit, you need to meet the following criteria:
- Valid Social Security Number: You and your spouse (if filing jointly) must have valid Social Security numbers.
- Income thresholds:
- Single or Married Filing Separately: Your adjusted gross income (AGI) must be under US$75,000 to qualify for the full payment.
- Married Filing Jointly: The AGI must be under US$150,000.
- Head of Household: Your AGI must be below US$112,500.
- Dependents: Qualifying dependents may also be eligible for an additional US$1,400 payment each, provided they meet IRS requirements.
When is the deadline to file for the stimulus payment?
The deadline to file your 2021 tax return and claim the Recovery Rebate Credit is April 18, 2025. If you miss this date, you will no longer be eligible to claim the payment.
How does the Foreign Earned Income Exclusion affect eligibility?
The Foreign Earned Income Exclusion (FEIE) can help reduce your taxable income and make you eligible for the stimulus payment even if your earnings exceed the initial thresholds. In 2021, the FEIE allowed US expats to exclude up to US$108,700 of foreign-earned income.
For example, if your income in 2021 was US$150,000, using the FEIE could reduce your taxable income to US$41,300. This amount is well within the limit for single filers, qualifying you for the full US$1,400 payment.
How does income phase out the stimulus payment?
The payment amount decreases as your income surpasses the thresholds:
- Single filers: Payment phases out completely between US$75,000 and US$87,000.
- Married Filing Jointly: Phase-out begins at US$150,000 and ends at US$174,000.
- Head of Household: The payment phases out between US$112,500 and US$124,500.
If your income is within the phase-out range, the payment will be reduced proportionally. Those earning above the upper limits will not qualify.
How will the payment be received?
If you qualify for the Recovery Rebate Credit, the amount will be added to your 2021 tax refund. This can either be deposited directly into a US bank account or sent as a mailed check, depending on your preference indicated on your tax return.
Can US expats married to non-US citizens claim the payment?
Yes, US citizens married to non-US citizens can still claim the stimulus payment. However, specific rules apply:
- Married Filing Separately: If your spouse does not have a Social Security number, filing separately is usually the best option for claiming your US$1,400 payment.
- Income Reporting: You are not required to include your non-US spouse’s income on your US tax return. However, you must clearly mark your filing status as Married Filing Separately.
What happens if you miss the filing deadline?
If you miss the April 18, 2025, deadline, you lose the chance to claim the Recovery Rebate Credit. Filing on time ensures that you receive this benefit.
What steps should US expats in India take to claim the stimulus payment?
To claim the 2021 stimulus payment, follow these steps:
- Organize your financial documents: Collect income statements, Social Security details, and any relevant foreign account information.
- Apply tax deductions or exclusions: Determine if you will use the standard deduction, itemize expenses, or apply the FEIE to lower your taxable income.
- Submit your 2021 tax return: File your tax return before the April 18, 2025, deadline to claim the Recovery Rebate Credit.
- Work with a tax professional: Seek guidance from an expert familiar with US and Indian tax laws to ensure accurate and timely filing.
Why should US expats act now?
The deadline for claiming the 2021 stimulus payment is approaching. Acting quickly ensures you receive the credit, which can increase your refund or reduce your tax liability.
Preparing your documents early and seeking professional assistance can help you go through the filing process quickly and secure your payment without complications.