How many times have you heard people say, “I could never make aliya. It’s too difficult financially”?
Well, now there is one less excuse.
There are the standard financial pluses of living in Israel: the Israeli unemployment rate is lower than in America, day school tuitions are cheaper, and you don’t need to use personal vacation days for the chaggim.
While there are many benefits to living in Israel, there are some financial challenges, particularly around tax-filing time. While Americans living in Israel have an obligation to file with the IRS, Israel and America have a tax treaty between them, according to which if you pay taxes in Israel and also owe them in America (since America taxes her citizens on worldwide income), you can take a tax credit on your American taxes for what you paid to Israel.
In addition to filing U.S. taxes, American olim must file FBAR forms and they also may be responsible for filing under new FATCA requirements.
Confused? You’re not alone. But if you used this confusion as an excuse not to make aliya, your excuse no longer holds water. A new book can help you.
The IRS recently implemented FATCA, and Uncle Sam wants you to file your American taxes (in addition to your Israeli taxes) and FBAR form, but before you start to get too worried, there are solutions. For starters, get a copy of my recent book, The Expatriate’s Guide to Handling Money and Taxes? As a financial adviser with more than two decades of experience helping Americans abroad handle their American brokerage accounts and deal with the problems that arise from living in dual currencies, I wrote the book with the help of various leading international tax lawyers and accountants.
Just as you would extensively research communities, ulpans, schools, and jobs before moving to Israel, learn what your tax obligations to the Old Country will be when you are offshore. This should make your transition easier, as you won’t have nightmares about the IRS demanding a share of your new salary.Doug Goldstein, CFP®