IRS adjusts some international taxes for 2024


The IRS recently released its official 2024 inflation-adjusted amounts for a wide variety of tax-related items, including some annual adjustments affecting various aspects of international taxation. Here are some key figures to be aware of:

Foreign Earned Income and Housing Cost Exclusions

Under the Internal Revenue Code, qualifying U.S. citizens and resident aliens Under the Internal Revenue Code, qualifying U.S. citizens and resident aliens may exclude a certain amount of foreign earned income from U.S. taxation. The foreign earned income exclusion amount will be $126,500 in 2024 (up from $120,000 in 2023).may exclude a certain amount of foreign earned income from U.S. taxation. The foreign earned income exclusion amount will be $126,500 in 2024 (up from $120,000 in 2023).

Similarly, qualifying U.S. citizens and resident aliens may also exclude a certain amount of their foreign housing expenses from U.S. taxation. The foreign housing cost exclusion will be $17,710 in 2024 (up from $16,800 in 2023).

Gift-Related Amounts

The Internal Revenue Code allows for an annual exclusion of a certain dollar amount of gifts to noncitizen spouses. The annual exclusion for gifts to noncitizen spouses made in 2024 will be $185,000 (up from $175,000 in 2023).

The IRS inflation adjustments also address the reporting of “foreign gifts,” as so defined under the Internal Revenue Code. That is, if the value of the aggregate foreign gifts received by a U.S. person exceeds a threshold amount, that person must report each foreign gift to the IRS. Different reporting thresholds apply for gifts received from:

  • Nonresident alien individuals or foreign estates, and
  • Foreign partnerships or foreign corporations.

For gifts from a nonresident alien individual or foreign estate, reporting is required only if the aggregate amount of gifts from that person exceeds $100,000 during the tax year. For gifts from foreign corporations and foreign partnerships, the reporting threshold amount will be $19,570 in 2024 (up from $18,567 in 2023).

Note: Some 501(c) organizations may be exempt from the requirement to report foreign gifts.

Expatriation

For 2024, an individual with average annual net income tax of more than $201,000 (up from $190,000 in 2023) for the For 2024, an individual with average annual net income tax of more than $201,000 (up from $190,000 in 2023) for the five tax years ending before the date of the loss of U.S. citizenship will be considered a "covered expatriate."five tax years ending before the date of the loss of U.S. citizenship will be considered a “covered expatriate.”

Under a mark-to-market deemed sale rule, property of a covered expatriate is treated as sold on the day before the expatriation date for its fair market value. However, for 2024, the amount that would otherwise be includible in the gross income of any individual under the mark-to-market rules will be reduced by $866,000. (The reduction was $821,000 in 2023.)

Interestingly, in an apparent drafting omission, Internal Revenue Code Section 877(a)(2) wasn’t amended by the Tax Cuts and Jobs Act (TCJA) to reflect the corresponding change that the TCJA made to Sec. 1(f)(3). That is, Sec. 877(a)(2) states that the relevant base year of 2003 should be substituted for 1992, but 1992 no longer appears in Sec. 1(f)(3). Instead, 2016 is the base year in the current version of the statute. The calculations shown above reflect a presumption that the 2003 base year should be substituted for 2016. The IRS follows this presumption.

Big Difference

Annually inflation-adjusted amounts can make a big difference in the tax liability and tax-planning strategies of those with international interests. Consult the international tax team at Sol Schwartz & Associates for more information and assistance.

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