What is Double Taxation?
Being taxed on the same income by two different countries, which tax treaties and credits aim to prevent.
Definition
Double taxation occurs when the same income is taxed by two or more jurisdictions—typically the country where income is earned and the taxpayer's country of residence. For US citizens abroad, double taxation is a major concern because the US taxes worldwide income regardless of where you live. Relief mechanisms include the Foreign Tax Credit, Foreign Earned Income Exclusion, tax treaties, and Totalization Agreements for social security taxes. Despite these mechanisms, some double taxation may still occur.
Who Needs to Know This?
All US citizens and residents earning income abroad or receiving income from foreign sources, and foreign persons with US-source income.
Key Deadline
N/A - addressed through annual tax return filings
Potential Penalties
N/A - double taxation is a situation, not a violation
Related Forms
Common Mistakes to Avoid
- 1Not knowing about available relief mechanisms
- 2Using both FEIE and FTC on the same income
- 3Not claiming tax treaty benefits
- 4Assuming double taxation is always fully eliminated
Related Terms
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