Are You Living in Israel… and Still Paying U.S. Taxes?
Marylouise Serrato knows just how frustrating it is to be taxed like you live in America even when you don’t. As the Executive Director of American Citizens Abroad (ACA), she’s spent years fighting for the financial rights of U.S. expats, including many who call Israel home. And here’s the wild part: under current rules, someone can live, work, and pay taxes in Israel… and still have to file a full U.S. tax return.
Sound ridiculous? That’s because it kind of is.
The System Wasn’t Built for Expats
The United States is one of the only countries in the world that taxes based on citizenship instead of residency. That means if someone is a U.S. citizen, the IRS doesn’t care where he lives. He still has to report his income.
Sure, there are tax credits and exclusions that often reduce or eliminate the final bill. But the paperwork? Still required. The rules? Still confusing. And the risk of messing it up? Still high.
Marylouise and her team at ACA are pushing for a change called residence-based taxation. If it passes, Americans who live abroad and earn their income outside the U.S. might no longer need to file a U.S. return at all. That could be a game-changer for anyone feeling buried under tax forms and financial stress.
It’s Not Just About Taxes
Plenty of Americans in Israel try to “go local” when it comes to investing. That’s often where the trouble starts.
Buy a regular mutual fund at an Israeli bank? That’s likely a PFIC, a tax-inefficient investment in the eyes of the IRS. Set up a pension through a job in Tel Aviv? It might be taxed in full back in the States, even if it’s tax-deferred in Israel.
And don’t forget the FBAR and FATCA forms. Many expats say dealing with U.S. reporting rules is more stressful than the actual investing.
The Good News? You’re Not Stuck
The financial headaches of living abroad are real, but so are the solutions. Groups like ACA are advocating for policy reform. And professionals who specialize in cross-border planning can help navigate the maze without guesswork or surprises.
This article is for educational purposes only. It’s not financial, legal, or tax advice. Please speak with a qualified professional about your individual situation.
Want clarity on your own cross-border setup? Book your free Cross-Border Financial Evaluation at www.profile-financial.com/call. Make your money work where you live.
