Killeen Cross-Border Tax

Families With Ties Abroad

Soldiers serve overseas, marry abroad and return with foreign spouses, accounts and property. Contractors work in other countries. BOMCAS handles cross-border tax for Killeen clients remotely.

The Texas cross-border tax page explains treaty basics. This page covers military and contractor families in Killeen.

Soldiers Stationed Overseas

Military and civilian employees of the U.S. government cannot use the foreign earned income exclusion, even when they live abroad. Members on duty outside the United States and Puerto Rico on the normal due date generally receive an automatic two-month filing extension. A statement explaining eligibility goes with the return; interest on unpaid tax still runs from the normal due date unless combat zone relief applies.

Foreign Spouses

Soldiers married to nonresident spouses can choose to treat them as residents and file jointly, which usually lowers tax but requires reporting the spouse's worldwide income. Spouses need an ITIN or Social Security number. Spouses with income in their home country may claim credits for foreign tax paid.

Foreign Accounts

Families with accounts in Germany, Korea, Japan or a spouse's home country report them on FBARs when the total exceeds $10,000. Form 8938 applies at higher thresholds. Bank accounts opened while stationed abroad and forgotten are common.

Contractors Working Abroad

Contractors on long assignments overseas may qualify for the foreign earned income exclusion, up to $130,000 for 2025, if they pass the bona fide residence or physical presence test and their tax home is abroad. Those in combat zones as civilians do not get the military combat exclusion but may qualify for extensions.

Property Abroad

Families who own property in a spouse's home country report rental income on U.S. returns, with credits for foreign tax. Sales of foreign property are reported with gains in dollars.

Gifts and Inheritances

Residents who receive gifts or inheritances from foreign relatives over $100,000 in a year report them on Form 3520. The gift is not taxable but late reporting carries penalties.

Foreign Pensions

Spouses who worked abroad before marriage may have pensions in their home countries. Treaties decide which country taxes them. U.S. residents report foreign pensions on their returns and may claim credits for foreign tax withheld.

Children Born Abroad

Children born overseas to a soldier are generally U.S. citizens at birth when the citizen parent meets the physical presence rules, and time abroad on military service counts toward them. A consular report of birth abroad and a Social Security number are needed before the child tax credit can be claimed.

Retiring Abroad

Military retirees who move abroad remain U.S. taxpayers on retired pay, which is not foreign earned income.

Host Country Taxes

Status of forces agreements usually exempt soldiers' military pay from host country tax, but spouses who work locally or own businesses abroad may owe tax there. Credits for foreign tax avoid double tax on the U.S. return.

Bringing a Foreign Spouse Home

In the year a nonresident spouse moves to Killeen, the couple may file as dual-status or make the election to file jointly for the whole year. We compare both options.

Foreign Investments

Foreign mutual funds and investment accounts held by a spouse may be passive foreign investment companies, which have complex reporting on Form 8621 and can be taxed heavily when sold, so they should be reviewed early.

Foreign Spouse Self-Employment

Spouses with businesses abroad file Schedule C once residents, and may also pay social taxes in the other country, unless a totalisation agreement assigns coverage to one country.

Common Filings

FBAR and Form 8938.
Form 2555.
Form 1116.
Form 3520.
Form W-7.
Joint return elections.