Dreaming of Canada? Moving abroad can be a refreshing change, but many fail to realize how their taxes are affected – proper preparation is key. Read below to ensure your financials are in order before hopping on that plane!

Tax Considerations before Moving Abroad

Continue U.S. Tax Returns

Yes, you have to keep filing. Even if you qualify for an exclusion (more on that below), you have to claim it by filing, and you may have to pay self-employment tax, so never stop filing your tax return. The IRS will miss you too much.

Report Your Foreign Accounts with FBAR

If the combined value of your foreign accounts meets or exceeds $10,000 at any point during the year, you must file FBAR. Additional reporting may be required if the total exceeds $200,000. These are simply for reporting purposes, not for taxation. Failing to report your foreign accounts come with severe penalties.

Avoid Foreign Investments

Because of high U.S. taxes, interest charges, and tax treaty obstacles, foreign investments such as mutual funds and savings options are generally discouraged. The exception would be a pension that is based in one of the few countries that the U.S. has a tax treaty that covers pension participation. If you’re looking to invest, consult a professional that is very familiar with the tax implications.

Keep Social Security in Mind

Double coverage may occur through foreign and U.S. social security systems, especially if you work in a self-employment capacity. In general, your earnings are likely to be subject to U.S. social security taxes.

Exclusions and Credits

On a good note: you may not meet the earning threshold, and therefore be exempt from paying regular taxes. If you made under $100,800 in 2015 for example, you qualify for the exclusion. Rental income, dividends, capital gains, and interest, do not qualify as earned income and are subject to taxation. In addition, there is a foreign housing exclusion, a tax break to offset housing costs. For 2015, the maximum amount was $14,112, but varies by city. There are numerous exceptions to this exclusion, as well. To claim these exclusions, you need to fill out Form 2555 with your tax return.

An alternative to these exclusions is claiming the foreign tax credit to reduce taxable income; this is essential for high earners.

Moving abroad? Start here.

Moving abroad comes with many important to-dos, and your taxes are no exception. The best thing to do is consult your trusted tax professional before and during your time abroad to ensure you are up to date on your returns and payments. Now, bon voyage!