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American ex-pats living abroad come across certain sticky situations when it boils down to taxpaying. The most significant of them is double taxation. Ex-pats are always anxious about paying taxes twice on the same income, once to the native country (where the ex-pats reside currently) and to the IRS. This is why you must get in touch with International Tax Consultants in Toronto. They will have clarification on the recent updates and modifications related to American taxes.
Now, if you are wondering if you could save tax from sending money to family in the USA, you must be aware of a few factors. Please read through for the latest information on this topic.
Who are counted in as family members for tax discounts?
It is the most crucial thing to know that you cannot simply transfer money to any family member and ask for a tax deduction. There are certain rules and regulations laid down by the IRS regarding the same. Firstly, who are considered family members to whom you can send money and claim tax benefits?
The family member must fulfill the following criteria.
- He/ she must be a U.S. citizen
- He/ She has to be a U.S. resident alien (in case living outside America)
- The family member should live either in Canada or in Mexico (in the case of a U.S. resident alien)
The family member may have to pass a relationship test. There should be a direct link between you and the involved member. He/ She must be connected to you legally (foster child/ step-child/ step-parents/ step-siblings etc.) if they are not related to your family lineage.
How can you claim tax benefits for sending money to family members?
„How can you claim tax benefits for sending money to family members?”
You can opt for tax benefits through tax-deductible expenses. You must, however, show that the involved family members are financially dependent on you because they are unable to sustain themselves. The form that is included must be filled out and certified in the nation where your parents or grandparents reside.
The key conditions are:
- The relative you are helping must have a taxable gross income of less than $4,300 in 2021
- Over 50% of the relative’s support must have been provided by you as the taxpayer throughout the tax year
Once you comply with these conditions, you can opt for tax benefits for transferring money to a family member and save tax from sending money to your family. For more details, please contact a Personal Tax consultancy service in Toronto.
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