How are Expats taxed after the 87k?

[Sunking]

Just wondering how the IRS taxes u after the 87k. At 88k do they tax u as if you made 88k and tax at the 88k bracket or tax u as if you made 1k.

 

[typhoonpilot]

88k

Tp

 

[X man]

87k

I believe they tax you on the amount over that, as if you made 127K, you would be taxed on the 40K above and beyond the 87K. It would be as if you made 40K, and what ever tax bracket you fell into, that would be the tax rate. This info is based on older info, so probably ten phone call s would get the right info.
Cheers

 

[tyuwerty]

Anything after the exclusion is taxed as it is the first dollar in that bracket. You don't start again at zero anymore.

So as TP said:

88k

 

[Sgt. Hartman]

http://www.irs.gov/publications/p54/ch04.html#d0e3841


This link should have all the answers. The example shows that you are taxed on the income in excess of the $85,700 allowable exclusion for 2007.

Foreign Earned Income Exclusion





If your tax home is in a foreign country and you meet the bona fide residence test or the physical presence test, you can choose to exclude from your income a limited amount of your foreign earned income. Foreign earned income was defined earlier in this chapter.

Sgt.

 

[Sunking]

Thanks for the info guys.

 

[PadFull'oTrim]

Did I read that link correctly regarding residency requirements:

You need to live overseas 330 days in a year for the tax exemption to apply.

That mean if you have a 1 month on/off rotation, you do NOT meet the residency requirement and all income generated is subject to US taxes? Is that correct?

Is there anyone who is doing a 1 month on/off rotation that could provide clarification to that?

Thanks.

 

[Gillegan]

Did I read that link correctly regarding residency requirements:

You need to live overseas 330 days in a year for the tax exemption to apply.

That mean if you have a 1 month on/off rotation, you do NOT meet the residency requirement and all income generated is subject to US taxes? Is that correct?

Is there anyone who is doing a 1 month on/off rotation that could provide clarification to that?

Thanks.

There is also another test of residency that is called the bona fide residency test. It is more of a common sense test for overseas residency. When I moved overseas, I used the 330 day test to establish my residency and then remain qualified under the bona fide test. That said, I don't believe that a month on/month off job where you spend your month off in the states would qualify for overseas residency so any income not taxed by your country of employment would be subject to U.S. income tax (provided that country has a tax treaty with the U.S.).

You might consider this: there are only two countries in the world that tax the income of its citizens who reside overseas - the U.S. is one of them.

 

[d328pilot]

You might consider this: there are only two countries in the world that tax the income of its citizens who reside overseas - the U.S. is one of them.

How far we have come as a country since the "no taxation without representation"

It's painful to pay so much each year (even with the exemption) when the only service you use is your passport. Then when I have to go get something notarized at the Embassy and they charge me $30 to boot.

 

[typhoonpilot]

How far we have come as a country since the "no taxation without representation"

It's painful to pay so much each year (even with the exemption) when the only service you use is your passport. Then when I have to go get something notarized at the Embassy and they charge me $30 to boot.

Think of it as an insurance policy. You are paying for that helicopter and the aircraft carrier that it is stationed on to come rescue you when the country you are in devolves into anarchy.


TP

 

[CALDC9]

Think of it as an insurance policy. You are paying for that helicopter and the aircraft carrier that it is stationed on to come rescue you when the country you are in devolves into anarchy.


TP

TP: Well said:

 

[Skater]

Think of it as an insurance policy. You are paying for that helicopter and the aircraft carrier that it is stationed on to come rescue you when the country you are in devolves into anarchy.


Amen, Brother

 

[rtwo]

The 14% of you salary that goes to FICA is to insure your retirement. What a fine insurance policy that is. So good in fact that you participate if you wnat to or not

 

[NEDude]

How does the Foreign Tax Credit work? Most of the contract jobs I see state your income, after local taxes have been paid - ie. Indigo pays $10,000 net per month after Indian Taxes have been paid. So officially your income is something like $14,000 per month. The way I understand it is the foreign tax credit is to prevent you from getting a double tax liability, both to India and the USA. Do I understand that correctly?

 

[Sgt. Hartman]

How does the Foreign Tax Credit work? Most of the contract jobs I see state your income, after local taxes have been paid - ie. Indigo pays $10,000 net per month after Indian Taxes have been paid. So officially your income is something like $14,000 per month. The way I understand it is the foreign tax credit is to prevent you from getting a double tax liability, both to India and the USA. Do I understand that correctly?

Some countries have an income tax that all workers are required to pay even if you are an expat. Now, the US has "income tax treaties" with other countries. So if you pay tax to a foreign government and the US has a treaty with said foreign government, then you do not have to double pay on your taxes. You can get a credit for taxes paid to the foreign government. This works differently when compared to your foreign earned income exclusion. Other countries such as the UAE do not charge an income tax to their workers. So, in this specific case the US can not have an income tax treaty with a country that charges no income tax. This is where you can choose to exclude a portion of your foreign earned income. For US expats working in the UAE, since you can't get a credit for income taxes paid to the UAE you just choose to exclude up to the max allowable foreign income.

This link to the IRS website should have all the answers regarding credits and treaties versus exclusions

http://www.irs.gov/publications/p514/ar02.html#d0e252

Sgt.