With tax season in full swing, many current and future teachers who work online or abroad are asking: “What taxes am I required to pay on my teaching income?”
If you’re in that same boat, you’ve come to the right place! We’re here to answer all your tax-related questions about teaching abroad and online.
Thankfully, filing taxes as a teacher doesn’t have to be complicated—especially if you’ve kept good documentation along the way! It’s all about having the right papers, knowing when to file them, and keeping good records of your income and work-related expenses. It’s not a difficult process, we promise!
Keep scrolling to learn how to file your U.S. taxes as an online teacher or an American ex-pat teaching aboard. After reading our tax guide, if you have additional questions, we recommend speaking to an accountant or consulting the IRS website.
Filing a U.S. tax return as an online teacher
If you’re an online teacher, the IRS considers you an independent contractor. As a result, you are required to pay about 15.3% in taxes on your yearly income. Throughout the year, it’s prudent to set aside 15.3% from every paycheck into savings to avoid any shocks at tax season.
Unlike in-office teaching jobs in America, you may not receive a 1099 Form from your online teaching employer. (For those who don’t know, your 1099 Form states your annual income.) As a result, we recommend keeping a spreadsheet of your earnings, so you aren’t scrambling to add up numbers.
As an independent contractor, you are required to file your taxes by April 15 every year.
Possible tax deductions for online teachers
While the 15.3% tax rate for independent contractors may seem high, we do have some positive news for you: online teachers often qualify for many tax deductions!
Indeed, any work-related expenses that you accumulated over the tax year could qualify. These expenses include office rentals, a new computer or office equipment, your cellphone bill, and even the cost of your high-speed internet.
Keep in mind, you can’t write off 100% of your phone or internet costs! For instance, if you use your home Wi-Fi for work about 50% of the time, you would 50% of your Wi-Fi as a work expense on your tax filing.
Filing a U.S. tax return as a teacher abroad
Any American working abroad should file their U.S. tax return. However, unless you’re making over $100,000 per year, it’s unlikely that you will owe any taxes, according to the Foreign Earned Income Exclusion. To qualify as a foreign worker (and benefit from the associated tax exclusions), you need to be living abroad for 330 days out of the tax year.
The tax rules for American ex-pats exist for several reasons. For instance, in many cases, you may already be paying taxes to the country where you’re employed as a teacher. These paid taxes fall under the Foreign Tax Credit, which protects you from double taxation where you pay taxes on income that you already paid taxes on!
But even if your income falls below $100,000—and let’s face it, it probably does!—you should still file a completed U.S. tax return. Indeed, not filing one could result in being audited by the IRS, causing unnecessary hassle for all involved.
As an American resident working abroad, if you don’t wish to file on April 15, you qualify for an automatic extension until June 15. However, in cases where you require even more time, you may request an extension until October 15. Keep in mind that if you owe taxes, the interest will begin accumulating on April 15.
Possible tax deductions for teachers abroad
If your employers don’t cover your housing as a teacher abroad, you can deduct it on your U.S. tax return. These deductions fall under the Foreign Housing Exclusion and they can include rent, utilities, parking, and housing insurance. All reasonable expenses are typically deductible up to 30%.
Furthermore, if you moved to teach English abroad in the current tax year, you can also declare your associated moving expenses. These could include airplane tickets, storage costs for your belongings in the U.S., and temporary lodging costs in your new country of work (prior to finding a permanent residence). To qualify, you must maintain your ESL teaching position for a minimum of 39 weeks.
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Non-exempt taxes for teachers abroad
It goes without saying that if you worked in America during the tax year, you are required to pay the associated taxes. So, collect those 1099 forms from your American employers and file your U.S. tax return accordingly!
However, there are two non-exempt taxes that you might not have considered:
- Local property taxes: If you're a homeowner or property owner, you are required to pay the associated property taxes.
- Capital gains taxes: If you increase your capital by selling bonds, stocks, or other assets in America, you will be required to pay taxes on those gains.
Paying local taxes as a teacher abroad
Before signing your contract to teach abroad, you should ask your future employer about the tax rules for foreign workers in their country.
First and foremost, you need to know whether teachers from abroad are expected to pay local taxes. When the answer to that question is “yes”, you should immediately inquire about the country’s tax rules, including what percentage of your paycheck will go toward taxes. As an example, if you work in South Korea, your employers will simply remove 3% from every paycheck.
It’s also vital to know your country of employment’s yearly deadlines for tax filing. Unlike the United States, where tax season happens during the springtime, many nations file their taxes at totally different times of the year. For instance, in Costa Rica, teachers from abroad are expected to file their taxes in October.
If your new employer is unable to answer your tax-related questions, look online for the official website of that country’s revenue agency or consult with a local accountant.