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Filing Taxes While Overseas: What You Need to Know

Military members: Learn more about the special considerations provided to you when filing taxes from abroad.

by Navy Federal on January 31, 2019

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Being stationed abroad brings many changes—in culture, duties and new experiences. One thing that doesn’t change is your duty to file your U.S. income tax return. The good news is, as a military member stationed overseas, you may qualify for certain automatic extensions related to the filing and paying of your federal income taxes.

Unlike the standard Oct. 15 extension request, you’re allowed an automatic 2-month extension to June 15 to file your taxes. With the extended deadline, you’ll have more time to gather your documents, figure out exchange rates (if necessary), determine eligible military-related payments and expenses to deduct, and coordinate filing a joint return with your spouse from abroad.

Gather Important Documents

Before you begin filling out any tax forms, collect all your records so you have them when you’re ready to start. These documents may include 1099 forms, deduction and credit information, last year’s tax return and any documents for investments, rental properties or mortgages. You’ll also need your military ID, bank account and routing numbers if you’re filing electronically, and receipts for charitable donations.

Exchange Rates

If you receive some or all of your income in a foreign currency, you’ll need to translate the foreign currency into U.S. dollars when filing your tax return. Generally, you can use the yearly average exchange rate to report foreign income earned throughout the year. You can find yearly exchange rates for many countries on the IRS website. If you only earned foreign income during a specific month or certain days, you can use the average exchange rates for that time period.

Military Expenses

A number of eligible military-related payments and expenses can be claimed for deductions on your tax return. One important benefit for military members stationed abroad is combat zone pay. If you’re serving in a designated combat zone or hazardous duty area, most of your military pay and reimbursements are exempt from federal income tax. Serving in this area for 1 or more days in a month qualifies you for exclusion for the entire month. Your income is also exempt for months when you were hospitalized as a result of anything that occurred in a combat zone.

Filing Jointly

Being out of the country presents an added challenge when you and your spouse file a joint return. You’ll both have to gather your income information to fill in the appropriate forms and possibly send your tax return back and forth for signatures. Some people find this task is more easily accomplished by filing your tax return online (although not all tax return software can accommodate a foreign address). You and your spouse may also need to file a tax return in the state designated as your state of legal residency (typically your home of record, unless you changed it).

How to File

If you choose to take advantage of the June 15 filing extension, be sure to write “Taxpayer Abroad” at the top of your 1040 and attach a statement of your international posting if you mail your return to an IRS service center. If you’re stationed abroad and have an APO or FPO address, you can file your return by mailing it to the service center in Austin, Texas:

Department of the Treasury
Internal Revenue Service Center
Austin, TX 73301-0215
USA

If you have a tax refund coming your way, you can request that it be direct deposited into your Navy Federal account. Use your tax refund to kick-start your savings and get ready for your return home.

This article is intended to provide general information and shouldn't be considered legal, tax or financial advice. It's always a good idea to consult a tax or financial advisor for specific information on how certain laws apply to your situation and about your individual financial situation.