Tax Fairness for Americans Abroad Welcomes Rep. LaHood’s Residence-Based Taxation for Americans Abroad Act

Tax Fairness for Americans Abroad welcomed the introduction in Congress of a historic bill by Representative Darin LaHood (R-IL) that would help the millions of Americans living abroad lead normal lives by ending double taxation and related financial discrimination.

If enacted, the Residence-Based Taxation for Americans Abroad Act would for the first time give Americans abroad the option to be taxed only by the country in which they live unless they also have U.S. source income. This would free millions of Americans of the obligation to incur expensive expat tax adviser fees just to prove that they owe no U.S. taxes. Instead, Americans abroad, including so-called “accidental” Americans, would be able to opt for a system known as residence-based taxation and which is already employed by every other free country in the world.

“We thank Mr. LaHood for his leadership on this issue,” said Brandon Mitchener, Executive Director of Tax Fairness for Americans Abroad. Building on the experience of its Board members as well as significant support from other volunteers, TFFAA published a detailed, bipartisan proposal for residence-based taxation in October. Since then, it worked closely with Mr. LaHood’s office and external tax experts to translate that proposal into solid legislative language. 

“For the first time in our lifetimes, Americans abroad can see the light at the end of the long, dark tunnel that has cost them huge amounts in accounting fees, ruined relationships, and made it impossible for them to live normal lives,” Mitchener said of the LaHood bill.

“We look forward to working with Mr. LaHood to collect feedback on this non-partisan approach and to help advance and enact the bill to the president’s desk next year,” he added. 

Under Mr. LaHood’s proposal, Americans born and living abroad or who have lived in a foreign country since 2010 or since reaching age 25 would be able to opt into residency-based taxation. Americans who move abroad going forward could also opt for residence-based taxation after a transition period, subject to a departure tax on high net-wealth individuals to prevent tax evasion. The proposal includes provisions for Americans abroad who later decide to return to the United States as a resident.

Expats with U.S.-source income, such as real estate, investment or retirement income, would still need to pay U.S. taxes on most of that income. 

The bill would also prevent foreign financial institutions from discriminating against Americans living overseas who have opted for residence-based taxation. 

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For further information please contact: media@taxfairnessabroad.org