Two Types of Double Taxation
Double taxation is defined as the levying of taxes by multiple jurisdictions on the same money, whether it be income, assets, or financial transactions. In some cases, treaties are enacted between different jurisdictions so as to avoid this but many times an individual can be taxed two or even three times. Most Americans believe double taxation occurs when you’re working abroad and sending money back home to a U.S. bank account. However, double taxation can also occur when immigrants import money from their home country or in the case of shareholders when they receive dividends. Fortunately for residents of Austin, double taxation can be minimized or altogether avoided with the help of a certified professional accountant.
Two Kinds of Double Taxation
There are two kinds of double taxation, depending on what jurisdictions are imposing the taxes. These two types include:
- International double taxation –occurs across borders when U.S. citizens or resident aliens work in a foreign country; can also occur when money from another country is brought into the country, usually from inheritance or sold property
- Domestic double taxation – occurs when a person dies and multiple states claim the individual was domiciled in that particular state; can also occur when an individual works in a different state than where they live, or when a college student obtains education in a state other than where they live
Both cases of double taxation can be often avoided or minimized if the individual knows how to apply for certain exemptions.
If you’ve been double taxed in the past or will be in a situation in which double taxation is possible in the future, you may want to discuss your particular case with a professional accountant. Fill out the contact form at the top of this page if you’d like more information about how a certified consultant can ensure you’re not being taxed more than legally required.