Tax Guide for US Expats Living in Norway

Moving to Norway for a new, peaceful way of life won’t let you escape your tax liability to the United States. You’ll still have to file your taxes, even when living abroad.

Lowering your taxable income while living abroad in Norway is possible by claiming the foreign earned income exclusion (FEIE). Our tax accountants can help you figure out your exclusion amount, including the foreign housing exclusion, using IRS Form 2555. We will also see if you qualify for the foreign tax credit (FTC), which can stop double taxation of your income. On top of filing an annual tax return from Norway, you might have to report foreign financial assets and bank accounts. Our tax accountants can explain how these additional reporting requirements apply to you and help you satisfy any extra filings with the IRS.

Call US Tax Help’s tax CPAs for expats living in Norway at (541) 362-9127 to learn more about how we can help you during tax season.

Lowering Your US Taxable Income While Living in Norway

If you relocate from the United States to Norway, you must still file an annual tax return with the IRS for each year you keep your American citizenship. For most expats, this means filing taxes every year they live abroad.

Although the IRS assesses taxes based on a taxpayer’s worldwide income, it lets expats who meet the necessary criteria exclude a large portion of their foreign income as taxable. This perk is known as the foreign earned income exclusion, which our tax accountants for U.S. expats can help you claim by filling out IRS Form 2555. We will also use this form to figure out your foreign housing exclusion, which lets you exclude foreign income used for housing expenses.

The exclusion limit in 2024 is $1265,000 per person, or double that for married couples filing jointly. Because the exclusion limits are so high, many expats can use the FEIE to eliminate most or all of their income from taxation by the IRS while living in Norway.

To get the FEIE, you need to qualify. Expats can pass one of two tests: the bona fide residence test or the physical presence test. For the IRS to consider you a bona fide resident of Norway, you must reside there for an uninterrupted period, including a full tax year.

You can pass the physical presence test if you are in Norway for 330 full days over a year.

Because you need to pass one of these tests before claiming the FEIE, you might not benefit from this exclusion until a year or so after relocating to Norway. Some expats carefully plan their move so that they can get the FEIE the first year they file taxes abroad.

Furthermore, it’s important to point out that if you work remotely for an American company while living in Norway, you cannot exclude any of that income from taxation by the IRS.

Addressing Double Taxation as an Expat in Norway

Fortunately for expats living in Norway, avoiding double taxation is possible by using the foreign tax credit. To benefit from this perk, you have to file the necessary paperwork with the IRS by Tax Day.

Expats claim the foreign tax credit by completing IRS Form 1116 and attaching it to a completed 1040 or comparable form. On this form, our tax CPAs will note the taxes paid to your foreign country of residence, Norway, and figure out the credit accordingly. Only specific taxes, such as war profits, income, and excess profits taxes, qualify for the foreign tax credit.

The FTC lets you avoid double taxation because it stops the IRS from taxing you on income already taxed by the government in Norway. Thus, if you do not complete and file Form 1116 with the IRS, you might pay income tax to two separate countries.

As with the FEIE, you must pass the bona fide residence or physical presence test to benefit from the foreign tax credit. Because of the criteria for claiming these deductions and credits, it helps expats to start documenting their residency in a foreign country immediately after relocating from the United States.

Filing Implications of Accruing Foreign Financial Assets in Norway

When you move abroad and set up your life in Norway, you might gain additional filing responsibilities. This is more likely as you begin to accrue financial assets in a foreign country.

FATCA Compliance

The Foreign Account Tax Compliance Act created reporting mandates for expats and domestic citizens with significant foreign financial holdings. If, after moving to Norway, you have $200,000 in foreign financial assets on the last day of the tax year or more than $300,000 at any time during the year, you must file Form 8938. The reporting threshold doubles for married couples filing their U.S. taxes jointly.

You have to file Form 8938 for informational purposes, as you won’t be taxed on foreign financial assets by the IRS. However, if you fail to report assets to the IRS when necessary, you may incur expensive financial penalties. Expats need to file Form 8938 when they file their tax returns by Tax Day.

FBAR Compliance

On top of reporting foreign financial assets to the IRS, you may have to file a Report of Foreign Bank and Financial Accounts, also known as an FBAR, with the Financial Crimes Enforcement Network. This reporting requirement applies to any expat or domestic citizen with $10,000 or more across foreign bank or financial accounts. Like FATCA non-compliance, failing to file an FBAR when necessary may lead to costly penalties for expats living in Norway. Depending on your income and savings, you might have an FBAR reporting liability for each year you live abroad.

Call Our Tax Accountants for US Expats Today

Call our tax CPAs for expats living in Norway at (541) 362-9127 to learn more about what US Tax Help can do for you.