Filing your American taxes while being a Dutch tax resident. Under certain circumstances you can deduct the days worked abroad. That is about to come to an end.
Filing your American taxes while being a Dutch tax resident – days worked abroad deduction
This is a little technical, but exciting, so please stay with us. I will try to make it simple.
The days worked abroad only applies to those who have the so called 30% ruling in combination with the US nationality or greencard. If you do not have this combination, it is not for you.
The US taxes its nationals based on nationality. The Dutch tax residents on being a tax resident, not nationality.
The 30% ruling offers to choose to be a deemed nonresident tax payer. You are living in the Netherlands, but for tax purposes we say you are not living in the Netherlands. That is the deemed non resident status. Can only be done while you hold the 30% ruling. The result is that you do not need to pay Box 2 and Box 3 tax. Nor does your tax partner.
If then you chose not to be a tax resident, but you are a US national, then you have become a resident for tax purposes of the USA. That is how the Dutch tax office approaches that. And if you work under this status abroad (regardless which country), you can claim a days worked abroad deduction.
Conditions for the days worked abroad deduction
The conditions for the days worked abroad deduction is that you are under the 30% ruling. You have the US nationality or hold a US green card. You worked abroad and only the days you were physically not in the Netherlands count. Hence no travel days.
Your employer needs to sign the list of days worked abroad and you claim the days deduction in the income tax return.
The tax office will check and demand the calendar and signature of the employer to have the deduction accepted.
The deduction in the Dutch tax return for days worked abroad is an up count in the US tax return. Still with the high Dutch tax rates and lower US tax rates, very interesting.
How does this deduction come to an end?
The 30% ruling has changed in a 30% ruling till December 31, 2023. Those who were granted the ruling in that period have till 2027 the choice of being a deemed non resident tax payer.
The 30% ruling period from January 1, 2024 has become the 30%-20%-10% ruling. The choice of being a deemed non resident tax payer stops January 1, 2025. In other words, you only have 2024 to make use of that.
Is there a point in filing the Dutch tax return if we also pay US tax?
That we do know and the answer is YES. Before you are able to file your US tax return, you need to have filed your Dutch tax return. The Dutch tax return is the basis on which the US tax return can be processed.
As we are aware of this fact and that you have a mid April deadline, we offer an early service. Early in the sense that the software that enables us to process your Dutch return is ready early February. Hence early February we can process your Dutch tax return. The moment you have provided us all we need, maximum of three working days it takes to turn around the income tax return.
Feel free to connect with us. Our 2024 rate is EUR 430 incl VAT including tax partner for a regular income tax return. An entrepreneurs income tax return is charged at EUR 590 excluding VAT including tax partner. Please connect with us via info@orangetax.nl
IamExpat webinar filing your American taxes
February 27 at 19.00 hours BNC tax and Tax is Exciting organize via the IamExpat platform a webinar about the US Dutch tax combination. Feel free to join us. We do appreciate that very much !
