As a US green card holder, you are considered a US tax resident and are subject to US federal income tax on your worldwide income, including income earned outside the US.
Here are some key points to keep in mind regarding your tax obligations as a green card holder:
- Filing requirements: Green card holders are required to file a US tax return (Form 1040) every year, if their income exceeds a certain threshold. The threshold varies depending on your filing status, age, and other factors. For instance, if you’re a single filer under the age of 65, you must file a tax return if your income is at least $12,950 for the 2022 tax year. However, if you’re married filing jointly and both spouses are under 65, you must file a tax return if your combined income is at least $25,900. The filing threshold is higher for taxpayers who are 65 or older or who are blind. It is important to note that even if your income doesn’t meet the threshold, you may still want to file a tax return to claim tax credits or refunds. Failure to file a required return can result in penalties and legal consequences.
- Tax rates: The US tax system is a progressive system, meaning that higher income earners pay a higher percentage of their income in taxes. Tax rates range from 10% to 37%, depending on your income level. It’s important to note that tax rates and income thresholds may change from year to year, so be sure to stay up to date on the latest tax laws and regulations.
- Deductions and credits: There are various deductions and credits available to reduce your taxable income and lower your tax bill. Some common deductions and credits include the standard deduction, itemized deductions, child tax credit, and earned income tax credit. The standard deduction is a set amount that reduces your taxable income, and the amount varies depending on your filing status. For example, if you’re single, your standard deduction for 2022 is $12,950. Itemized deductions, such as charitable contributions and mortgage interest, may be more beneficial than the standard deduction, depending on your individual circumstances. Tax credits, such as the child tax credit and earned income tax credit, directly reduce your tax liability, and can result in a refund if your credit exceeds your tax liability.
- Foreign income: If you earn income from a foreign country, you may be eligible for the foreign earned income exclusion, which allows you to exclude up to a certain amount of foreign earned income from US tax. You may also be eligible for foreign tax credits if you paid taxes on foreign income. Properly reporting all worldwide income is required to ensure you pay the correct amount of US income tax due.
- Reporting requirements: In addition to filing a tax return, green card holders may be required to report foreign financial accounts and assets to the IRS. Foreign financial accounts include bank accounts, investment accounts, and certain types of retirement accounts. Failure to comply with these reporting requirements can result in significant penalties.
In conclusion, as a US green card holder, it’s important to understand your tax obligations and stay up to date on any changes in tax law. Filing requirements, tax rates, deductions and credits, foreign income exclusion, and reporting requirements are all important factors to consider when it comes to your tax obligations. If you have any questions or concerns, it’s always advisable to seek professional tax advice. Remember, staying informed and proactive about your tax obligations can save you time, money, and potential legal consequences down the road.
