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10 Tax Tips for American Expats in Thailand

With its unspoiled white sand beaches, rich culinary tradition, and low cost of living, Thailand has emerged as one of the top destinations for American tourists, expatriates, and retirees. In fact, Thailand is the second most visited country in Asia, and its capital city, Bangkok, has been named the world’s most visited city multiple times.

It shouldn’t come as a surprise that millions of expats from all over the world call Bangkok home. The economy is booming, the people are friendly, and there’s something to do for everyone. But if there’s one thing that all expats in Thailand have to deal with, it’s taxes.

Here are a few things that every American expatriate in Thailand needs to know, including preparing your taxes, navigating the Thai tax system, and how to file a tax return in Thailand.

Do expats in Thailand need to pay Thai income tax?

Yes, but your Thai tax obligations depend on your tax status. Thailand’s equivalent of the IRS, also known as the Revenue Department, categorizes taxpayers into resident and nonresident. 

If you have stayed in Thailand for more than 180 days in a calendar year, you are considered a Thai resident for tax purposes. Otherwise, you are treated as a non-resident for tax purposes.

Thai tax residents are taxed on Thai-sourced income as well as a percentage of foreign income that is brought into the country. On the other hand, non-residents are only taxed on Thai-sourced income.

Does Thailand’s income tax apply to foreign income?

Yes, Thai residents are taxed on their worldwide income. If you are a resident, you will need to pay tax on both Thai-sourced and foreign income. Meanwhile, non-residents only pay tax on Thai-sourced income.

What is the income tax rate in Thailand?

Just like in the United States, the Thai income tax rate is progressive, with 8 tax brackets ranging from 5% to 35%.

When are taxes in Thailand due?

The filing and payment deadline for Thai personal income taxes is March 31st.

Do Americans living in Thailand still need to file a U.S. federal tax return?

Yes. According to the U.S. federal tax code, all United States citizens and permanent residents (also known as Green Card holders) have to file a federal tax return every year, even if they live and work overseas. 

American citizens and permanent residents are taxed on their worldwide income. That means even if you live and work abroad and are paid in local currency, you’re still on the hook for federal income taxes.

You can take advantage of tax deductions and exclusions to reduce your tax liability. If you’re not sure about your tax situation, talk to an expert tax professional.

Do I still need to pay U.S. state taxes?

That depends on your state residency. Some states don’t collect an income tax, while others require residents to file a yearly state income tax return, even if they are out-of-state or living abroad.

If you do not make the necessary preparations before you leave, you might run into a few state tax issues. It’s important to remember that each state has its own tax code, and the requirements depend on your state residency status.

If you plan to live or work in Thailand for more than a year, consider establishing residency in a state with no income tax to minimize your tax liability.

What tax forms do I need to file?

Use Form 1040, also known as the U.S. Individual Income Tax Return, when paying federal taxes on income over $10,000 (or $400 if you’re self-employed)

For most American taxpayers, the tax deadline is on April 15. However, American taxpayers abroad are automatically granted a filing extension on June 15, with an option for a second extension on October 15. To secure an additional extension, file a Form 4868, Application for Automatic Extension of Time To File U.S. Individual Income Tax Return, before June 15.

Use Form 8938, Statement of Specified Foreign Financial Assets, to declare foreign financial assets (e.g. real estate, government bonds, investments) worth $200,000 and above. You don’t need to report your primary residence owned in your name.

If you own foreign financial instruments such as bank and brokerage accounts and mutual funds with a combined worth of $10,000 and above, you need to file an FBAR, Report of Foreign Bank and Financial Accounts.

How do I save money on taxes?

If you pay income tax in Thailand, you can take advantage of several exemptions to reduce or even eliminate your U.S. tax liability on the same taxable income.

Foreign Earned Income Exclusion

American expats in Thailand can use the Foreign Earned Income Exclusion (FEIE) to reduce their tax bills.

For 2021, you can exclude up to $108,700 of earned income. That means you don’t have to pay tax if your income falls under that threshold. However, you still need to file a federal tax return and declare your income even if you have eliminated your tax liability.

U.S. citizens and permanent residents who are based overseas and meet the physical presence test are eligible to claim this benefit. That means you need to physically live in Thailand for at least 330 days in a 365-day period if you want to take advantage of the FEIE.

It’s important to note that the FEIE only applies to your earned income, or income derived from a job or self-employment. It doesn’t apply to capital gains, interest, dividends, pensions, alimony, and annuities.

Foreign Tax Credit

You can also take a foreign tax credit if you’ve paid taxes on the same income to the Thai tax system. This essentially prevents double taxation.

Under IRS rules, you cannot take a foreign tax credit on income that has already been excluded under FEIE. However, you can take a foreign tax credit on earned income above the FEIE threshold ($107,600 for 2020, and $108,700 for 2021).

Child Tax Credit

If you have dependents under the age of 12, you can claim a child tax credit, officially known as the Child and Dependent Care Credit, to reduce your tax liability. Your child dependents must have a U.S. Social Security Number (SSN) to qualify for the tax credit.

How to retire in Thailand?

If you wish to retire in Thailand, you will need to apply for a retirement visa, also known as a Non-Immigrant Category O visa. The visa is valid for 12 months and can be renewed annually.

How to file an expat tax return in Thailand?

The tax situation can be complicated if you live in Thailand, and you may incur heavy fines and penalties if you make a mistake. If you have any questions about your taxes as an American expatriate in Thailand, you might want to contact a tax expert. 
At TFX (Taxes for Expats), we have been preparing U.S. tax returns for Americans living abroad for over 25 years. You get to save more money as our CPAs know all the nuances of the US tax code. If you have not yet received your COVID-19 stimulus payments, we can help, too.