Former President Donald Trump has proposed ending “double taxation” for Americans living abroad, a policy that has garnered support from a group of Democrats living overseas. Currently, Americans living abroad must file tax returns with the IRS and pay taxes in the country where they reside and work, which can sometimes result in double taxation. Trump’s statement on ending double taxation is seen as a way to appeal to Americans living overseas, but the specifics of his plan have not been outlined. The proposal is part of Trump’s broader economic plan to reduce taxes for many Americans, including eliminating taxes on tips.
In 2022, approximately 4.4 million U.S. citizens were living in another country, according to the Federal Voting Assistance Program. Americans living abroad have been pushing for the U.S. to adopt a residence-based tax system, which would allow them to only pay taxes to the country where they are living and earning income. Many other countries already use a residence-based tax system. The idea of ending double taxation has bipartisan support among Americans living overseas, with both Democratic and Republican groups supporting plans to make this change.
Democrats Abroad, an organization representing Democrats living overseas, supports shifting to a residence-based tax system to end the double taxation of Americans living abroad. Their platform advocates for reforms that would address the tax issues faced by U.S. citizens residing overseas and make the tax system more administrable for the Treasury. A 2017 poll showed that 84 percent of Americans living abroad, regardless of political affiliation, support a residency-based taxation system. Republicans Overseas, on the other hand, has also called for Trump to back a residence-based tax system.
The current tax code already includes provisions aimed at reducing the burden of double taxation for Americans living abroad. The U.S. has tax treaties with many countries that enable residents to avoid or pay reduced taxes to alleviate double taxation. However, these arrangements vary among countries and specific types of income. If there is no tax treaty in place between the U.S. and another country, Americans living there would be required to pay taxes on their income according to U.S. tax return instructions. Despite existing provisions in the tax code, the issue of double taxation for Americans living abroad remains a concern, prompting calls for reform to switch to a residence-based tax system.
