U.S. Expat Taxes - Standard Deduction vs. Itemized Deductions

The standard deduction and itemized deductions are two options U.S. taxpayers, including U.S. expatriates, can choose between to reduce their taxable income, but they work differently. This article will give you an introduction to both types of deductions, a few examples of how they impact expats, and then give some perspective on why some expats choose one over the other. Ultimately, we strongly recommend getting professional guidance on your expat taxes.

• Key Considerations
• Standard Deduction
• Itemized Deductions
• Standard Deduction for Expats
• Itemized Deductions for Expats
• Choosing Between The Standard Deduction and the Itemized Deduction

Key Considerations for Expats

Simplicity of Filing: For expats with straightforward finances, the standard deduction can simplify tax filing, which is often appealing given the complexity of international tax compliance.

Eligibility for the Foreign Earned Income Exclusion (FEIE): Expats using the FEIE may have already reduced their U.S. taxable income significantly, making the additional deductions from itemizing less impactful.

Ultimately, for many U.S. expats, the standard deduction is an easy and sufficient choice unless they have high deductible expenses overseas or significant U.S.-based assets.

Professional Advice: Since expat taxes can involve complex rules (such as totalization agreements or tax treaties), consulting a tax advisor can help determine if itemizing specific deductions would be more beneficial based on individual circumstances. We can't stress this point enough! Expat taxes are intricate and it's highly recommended that you utilize an expat tax service.

Standard Deduction

The standard deduction is a fixed dollar amount based on your filing status. It’s a straightforward deduction that doesn’t require listing individual expenses.

For the 2023 tax year, the standard deduction amounts are:

• Single: $13,850
• Married Filing Jointly: $27,700
• Head of Household: $20,800
• Married Filing Separately: $13,850

For the 2024 tax year, the standard deduction amounts are:

• Single: $14,000
• Married Filing Jointly: $28,000
• Head of Household: $21,000
• Married Filing Separately: $14,000

For the 2025 tax year, the standard deduction amounts are:

• Single: $15,000
• Married Filing Jointly: $30,000
• Head of Household: $22,500
• Married Filing Separately: $15,000

You can claim the standard deduction without having to provide proof of expenses, making it easier and faster for most taxpayers.

Itemized Deductions

Itemized deductions allow you to deduct specific expenses, such as:

• Medical and dental expenses (if they exceed 7.5% of adjusted gross income)
• State and local taxes (limited to $10,000)
• Mortgage interest on a home loan
• Charitable contributions
• Casualty and theft losses (if in a federally declared disaster area)

With itemized deductions, you must keep detailed records of these expenses and report each category on Schedule A of your tax return.

Itemizing is beneficial if your total itemizable expenses exceed the standard deduction amount for your filing status.

Standard Deduction for Expats

The standard deduction is straightforward and does not require expats to list expenses or provide additional documentation. This can be convenient for expats without significant itemizable expenses.

Since expats may qualify for the Foreign Earned Income Exclusion (FEIE) or Foreign Tax Credit (FTC), they often have reduced taxable income, making the standard deduction a simple choice when itemized deductions are unlikely to exceed this threshold.

Choosing the standard deduction is especially common for expats with modest housing costs and no significant overseas property or mortgage expenses.

Itemized Deductions for Expats

Here are a few examples of deductions relevant to expats for you to consider in assessing you own situation. This is not a comprehensive list, but should help you in your research to understand your individual situation.

Mortgage Interest Deduction: Expats who own property overseas and pay a mortgage may benefit from itemizing, as mortgage interest on foreign properties is deductible.

State and Local Taxes: If an expat still has U.S.-based investments or property, they may pay U.S. state or local taxes. Though the SALT (state and local tax) deduction is capped at $10,000, it can still benefit expats with U.S. property or income.

Charitable Contributions: Contributions to U.S.-based charities are deductible, even if made from abroad. Expats who donate significantly may find this helpful for itemizing.

Medical Expenses: Some medical expenses incurred abroad may be deductible if they exceed 7.5% of adjusted gross income (AGI). This can be beneficial for expats in countries where health insurance or care may be costly and not fully reimbursable.

Foreign Property Taxes: Expats with overseas property can deduct foreign property taxes. However, the SALT cap also applies here, potentially limiting its value.

Choosing Between The Standard Deduction and the Itemized Deduction

Most taxpayers choose the option that gives them the largest deduction to reduce taxable income and lower their tax bill.

For expats, some deductions—like mortgage interest or foreign property taxes—may make itemizing worthwhile if they exceed the standard deduction. However, many expats find the standard deduction simpler and sufficient, especially if they don’t have high deductible expenses.

U.S. expats should understand that the choice between the standard deduction and itemized deductions has unique considerations. While both options are technically available, certain deductions can be particularly relevant, depending on their overseas financial circumstances. Again, it is highly recommended that you consult an expatriate tax professional to ensure you make the best choice for your specific individual situation.

Learn More About Standard vs. Itemized Deductions

• Itemized Deductions: What It Means and How to Claim
• Standard Deduction vs. Itemized Deduction

Sources

• Deductions for individuals: The difference between standard and itemized deductions, and what they mean
• Topic no. 501, Should I itemize?
• Publication 501 (2023), Dependents, Standard Deduction, and Filing Information
• About Publication 501, Dependents, Standard Deduction, and Filing Information