Tax for Americans in Norway

Americans living in Norway are subject to additional bureaucracy from their homeland.

As a general principle, once you are deemed ‘tax resident' in Norway you pay income tax on your worldwide income to Norway.

‘Tax residency' is a different thing to legal residency and the rules are complex, but typically you are deemed tax resident in Norway after 3-6 months of earning money in the country.

The precise rules depend on the double tax treaty between Norway and your country of citizenship, and also factors such as the amount of time you spend out of Norway, especially in the USA.

The USA's unique approach to taxation

American citizens, however, face additional demands from Uncle Sam. That's because unlike almost every other country on the planet, the US Government taxes its citizens no matter where in the world they live.

However, this does not mean that if you're living in Norway you'll be paying tax to both countries, unless you're a high earner.

A deduction for foreign-earned income

American citizens who are tax resident in Norway can claim a foreign earned income exclusion on their US tax return. This applies to the first $103,900 of their annual income earned through wages or self-employment. Anything over that amount will be taxed by both the USA and Norway.

That's the amount for 2018, and it's adjusted for inflation every year. At the time of writing, that works out at around 880,000kr, which is considered a very good annual salary here in Norway.

There's also the opportunity to exclude a portion of housing expenses. This only applies to individuals, and special rules apply to foreign service and military personnel.

Important: This exclusion only applies to your tax obligations to the United States government. You will still be obliged to pay tax like anyone else who lives in Norway!

Even if you earn significantly less than this threshold, you must still file a US tax return and most importantly, the appropriate exclusion form. At the time of writing, that's IRS Form 2555 or Form 2555-EZ.

There is an amnesty program available to those American citizens who have failed to deliver a US tax return, as long as you have paid taxes in Norway, of course.

The American Foreign Tax Credit

An alternative solution for American citizens living in Norway is to take advantage of the foreign tax credit program. This gives you a credit for any income tax you have paid in Norway against the tax you owe to the US.

Typically, the Foreign Tax Credit is a good option if you live in a country where the income tax rate is higher than in the US and you plan on returning to the USA.

That's because in these circumstances, the amount of credit claimed would be higher than the amount of tax you would owe the IRS, which means the difference can be carried forward for future years.

Which program is best depends on your individual circumstances and you should consult a tax attorney to understand the ins and outs of both options.

Questions?

Please don't ask specific questions in the comments section here. We are not accountants and cannot help you with your own personal finances. For one thing, most of the Life in Norway team is British, so the American tax system is a mystery to us!

We have heard from several people that the American Embassy in Oslo either do not have information or are unwilling to assist its citizens with questions about tax in Norway.

Help with Norwegian tax law

If you have any questions about paying tax in Norway as an American, the US foreign earned income exclusion, or any other matters related to your personal finances, you have a number of resources open to you:

• IRS International Taxpayers webpages
• The Norwegian Tax Administration

If you still require assistance, I strongly recommend speaking to an English-speaking Norwegian lawyer who understands and can advise on the US-Norway tax relationship.