The money will be sent out to people as an advance for a tax credit that will apply on 2020 income filed next year, but eligibility will be based on incomes declared for 2019 (2018 if the US tax authorities do not yet have details of your 2019 income).
The tax credit is described as a ‘refundable’ type, which in US tax terminology means it is like a French crédit d’impôt, so you should benefit in full even if you do not pay enough tax for it to be owing as a reduction of actual tax payable.
Even if it turns out that your 2020 income was too high to benefit in full, you will not have to pay back money received.
What is more if you earned too much to benefit, or benefit fully, in 2019, but are eligible based on 2020 income, then you will obtain a top-up payment next year after your 2020 income is declared.
The money will be owing to Americans who make US tax declarations – including expatriates – as long as they have incomes below certain, high, thresholds, and have a US social security number.
The rebate was part of the US CARES Act, passed on Friday, standing for Coronavirus Aid, Relief and Economic Security Act.
The tax credits for those eligible are $1,200 for individuals or $2,400 for married couples, as well as $500 per dependent child under 17.
Payments start to reduce if you declare over certain thresholds, including $75,000 in annual gross adjusted income as a single person or $150,000 for a married couple or $112,500 for a single parent.
The reduction is $5 per $100 over the threshold, meaning you get nothing if you have gross income over $99,000 for a single person or $198,000 for a couple.
Even people with little or no actual income to declare can benefit, as long as they are not a dependent of someone else who is benefiting.
The best way to make sure of benefiting is to ensure you file a tax return for 2019 income.
The CEO of expatriate tax specialists Bright!Tax, Greg Dewald, said: “The Coronavirus outbreak is unprecedented in modern times, and it’s appropriate and right that the US government is providing help for affected Americans around the world.”
Americans living in France should declare their 2019 income by April 15 this year (and pay estimated tax owing), though this is not necessarily to be taxed on it.
Due to double taxation rules most Americans in France do not actually pay any tax to America. Americans abroad may benefit from an extension to June 15, but if there is tax owing then interest may be due from April 15 to payment day.
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