Americans Living in Israel
According to U.S. tax laws, most U.S. citizens and Green Card holders living abroad have to file a Federal income tax return every year. They have to declare their worldwide income on their U.S. tax return and the taxability of the foreign income depends on the type of income and on the applicable tax treaty between the U.S. and the foreign country. In most cases, foreign earned income is not taxable.

Failure to file a tax return can have many implications such as problems in the renewal of an American passport, getting visas for family members, delaying payments of American Social Security benefits, and others.
Planning to return to Israel
If you plan to go back to Israel, there are some very important issues you should consider:

  • Notify IRS of an address change by filing form 8822.
  • Your US tax year in the year of move will be a short one and should be treated in a different way.
  • In some cases you can deduct moving expenses back to Israel, keep all receipts.
  • Take care of your US citizenship or Green Card situation.
  • Keep an active bank account in the US.
  • Weigh the Pros & cons of selling or renting your US home.
  • You should be aware of tax implications of selling stocks and other investments in the year you leave.
  • If you are not a US citizen or Green Card holder, submit a Form W-8BEN to your bank and broker to avoid withholding tax at source on interest, dividends and sales of stocks.
  • Will you withdraw or roll over your 401-K and IRA accounts.
  • Check your Social security rights accumulation.
  • You may have some Israel tax issues when you return – there are few Israeli tax advisors who specialize in Israel – International issues.
  • As a returning Israeli you may have some tax breaks in Israel – consult the right advisor.
  • If you are transferring money between Israel and the US, there are different ways to do it.
  • You should be aware that you may encounter some EstateTax issues in the US.