U.S. expat taxes in China
As an American or green card holder living in China, taking care of your U.S. taxes can feel like a complicated task. Knowing which tax rules affect you and understanding your options is a lot to stay on top of.
With H&R Block, you can rest easy knowing you’ve found the right expertise for U.S. expat taxes in China. Whether you need expat tax guidance on filing from abroad or information on FATCA and FBAR rules, we’re here to help.
Ready to file your expat taxes? We’ve got a tax solution for you—whether you want to DIY your expat taxes or leave it to one of our experienced Tax Advisors. Head on over to our Ways to File page to choose your journey and get started.
What U.S. citizens working in China should know
For starters, U.S. citizens and green card holders working in China should continue to file a U.S. tax return each year. However, filing while abroad comes with new considerations and questions. “Do I have additional information to report to the IRS? How do my Chinese financial accounts affect my filing? What options do I have to reduce my tax bill?”
We’ve outlined a few considerations for American expats in China, so you know what affects the tax you pay and which forms you need to file. Of course, tax rules for U.S. expats go beyond what we’ve listed below.
Need help? Our experienced tax advisors have seen it all and are here for you when you’re ready to tackle your taxes.
U.S. Expat Tax Filing Considerations
Working as a U.S. citizen in China can affect your taxes even if you don’t stay for very long. For example, if you earn income while on a short-term assignment, you’ll need to report that income on your U.S. taxes. As you establish deeper financial roots in China, you’ll have more considerations for your American tax filing.
You may need to report your Chinese financial accounts and assets. Generally, U.S. taxpayers with more than $10,000 in foreign bank or financial accounts are subject to FBAR filing and reporting requirements. You may also be subject to FATCA reporting requirements if you have foreign assets valued at $200,000 and higher.
You can lower your U.S. bill and avoid dual taxation with certain tax strategies. Expats may take advantage of one of two options, detailed below, to lower their taxes.
- The foreign earned income exclusion allows you to exclude your wages from your U.S. taxes. This option is available to those who meet certain time-based residency requirements.
- The foreign tax credit lets you claim a credit for income taxes paid to a foreign government.
Due to higher tax rates in China, it’s generally more favorable for U.S. expats in China to use the foreign tax credit to offset any taxes due in China. Your H&R Block tax advisor can confirm the best path for you.
Chinese Tax Filing Considerations
Your Chinese taxes are based on your residency status. As an expat in China, you’re considered to be a if you have a home (domicile) there or you are in China for 183 or more days in a year.
- Residents are taxed annually on all income, regardless of where it’s earned.
- Nonresidents are taxed monthly on China-sourced income only.
The income tax rates range are different depending on the type of income. Income tax rates are roughly divided into three categories:
- Comprehensive income tax rate is taxed between 3% and 45%. Income categories include wages, self-employment income, author’s renumeration and royalties.
- Business income tax rate is also taxed between 3% and 45%. The business income category includes income from sole proprietorships, partnerships and privately owned businesses.
- Other personal income tax rate is taxed at a 20%. Income categories include interest, dividends, capital gains and rental income, income from the transfer of property, and incidental income.
Similar to taxes in the U.S., the percentage of tax that you pay increases as your income increases. Comparably, the Chinese tax rates are higher, meaning many American expats in China would pay more in tax locally than in the U.S.
With this in mind, it’s typically better for most U.S. taxpayers to use the foreign tax credit. One of our experienced tax advisors can confirm if this is the best choice for your situation.
2020 Chinese income tax rates
For comprehensive income, individual income tax (IIT) is determined by the following equation:
(taxable income x tax rate) – quick deduction
Comprehensive Income Tax Rates
|Taxable income||Tax Rate||Quick Deduction|
|0 – 36,000||3%|
|36,001 – 144,000||10%||2,520|
|144,001 – 300,000||20%||16,920|
|300,001 – 420,000||25%||31,920|
|420,001 – 660,000||30%||52,920|
|660,001 – 960,000||35%||85,920|
Business Income Tax Rates
|Taxable income||Tax Rate|
|0 – 30,000||5%|
|30,001 – 90,000||10%|
|90,001 – 300,000||20%|
|300,001 – 500,000||30%|
The tax filing year is similar to the U.S. tax year, but with a few differences. Chinese taxes follow a January to December tax year. Tax returns are due between March 1 and June 30.
How H&R Block can help American expats in China
Are you a U.S. citizen living in China? H&R Block Expat Tax Services is here to help you get your U.S. taxes in order. With multiple ways to file, we’ve got a tax solution for you. Get started with our made-for-expats online expat tax services today!