Other Credits & Deductions that allows on the Tax Returns
Many of the credits and deductions for US citizens are not relevant to those residing outside the US, and are replaced by other credits.
Every US citizen is entitled to a standard deduction, the rate of which is determined according to marital status.
Conversely, the citizen may receive an itemized deduction.
Expenses eligible for itemized deduction are versatile, with limitations imposed on some.
Eligible expenses include:
Property tax, mortgage interest, donations (mostly unique to Israel), foreign income tax, medical expenses, tax return preparation fees, etc.
Itemized deduction will only take place if the sums exceed the standard legal deduction rate.
As of calendar year 2016, every citizen is entitled to an exemption of up to $4,050 for every person included in the return as a dependent.
This exemption is balanced by high income rates and is dependent on marital status.
In addition, the tax return includes credits:
- Foreign Tax Credit – accrued foreign taxes will be accumulated towards future income for up to 10 years. A total distinction exists between the type of collected tax (e.g., active vs. passive), and these types cannot balance out one another.
- Child and Dependent Care Credit – expenses for care of children and dependents, paid to enable the taxpayer to work, can be deducted. Limited to up to $3,000 for a single dependent or $6,000 for two or more.