Bill Introduced to Shift U.S. Taxation to Residency-Based System for Americans Abroad

Bill Introduced to Shift U.S. Taxation to Residency-Based System for Americans Abroad

U.S. Representative Darin LaHood has introduced the “Residence-Based Taxation Act for Americans Abroad”, proposing a major change to the U.S. tax system. The bill aims to allow U.S. citizens living overseas to be taxed based on residency rather than citizenship.

Under the proposal, citizens meeting eligibility requirements, including five years of tax compliance, could apply for non-resident taxpayer status while retaining their citizenship. Approved individuals would only be taxed on U.S.-sourced income, such as earnings from U.S. work, businesses, pensions, and property.

The IRS will oversee implementation, with applications effective from the filing year onward. This reform aims to simplify taxation for Americans abroad and align the U.S. with global norms.