Minimizing Your U.S. Tax Liability
2 min read
October 26, 2022
October 26, 2022
At a glance
Learn about minimizing your U.S. tax liability while living as a U.S. Citizen in Hong Kong. You’ll find out how to maximize your Expat tax benefits with H&R Block.
Did you know your tax benefit allowed for housing in Hong Kong is among the largest allowed under U.S. tax code? Check out how this may work to your advantage when filing your U.S. taxes.
As an expat living in Hong Kong, you no doubt are familiar with the low tax rates imposed by the Hong Kong government. Hong Kong imposes no capital gains tax or social security tax, with a maximum tax rate of 17 percent. Unlike the U.S., Hong Kong’s tax system is territorial, meaning your worldwide income is not necessarily subject to Hong Kong tax. While this is welcome news for many expats, this can create a challenge when minimizing your U.S. tax liability; Hong Kong’s low tax rates mean that you will likely need to rely on the foreign earned income exclusion and foreign housing exclusion or deduction to minimize or eliminate your U.S. tax liability.
Fortunately, the tax benefit allowed for residents of Hong Kong for their housing is among the largest allowed under the U.S. tax code. With that in mind, it will be important to track your housing expenses for each calendar tax year. For this purpose, housing expenses include your rent, utilities (excluding phone charges), residential parking, nonrefundable fees incurred for your lease, and the cost of renting furniture. Please note that you would not be able to claim a foreign housing benefit for mortgage payments on your home.
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