Quote:
Originally Posted by cairogal
Just to clarify, when I move in August of this year I will have to pay taxes next April on the money earned between August-December 2008, correct?
How long does it take to establish bonafide residence? 365 days w/o returning to the US?
So the housing is figured into the total taxable income?
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If you move in August, you have two options for filing for 2008:
One, you file by April 15th like usual, with no credit claimed for living overseas (i.e. because you will not have established residency in Dubai for US tax purposes at 31 December). Then, after August, 2009, you file an amended return, applying your overseas earned income exemption to your earnings from August to December, 2008 and wait for your refund.
The second option (and frankly, the one most people go for) is to file for an extension in April, 2009 for filing your 2008 returns. The reason you give is that you are in the process of establishing your overseas residency and after August, you will be eligible to take the earned income exemption. You then file your 2008 return within 2 months (I think it is, might be 3) of the date you have resided in Dubai for a full year.
The actual requirement is something like 330 days (check pub 54 or form 2555 instructions) - which means in that first year, you can actually be back in the US for 30 days or so for business or visiting. Or you can wait until you have spent an entire calendar year (without home visits) overseas - just apply for extensions on the time to file until you have fulfilled the requirement. (You do have to apportion your income for the split year, and you are supposed to send in a check for what you think you owe when you request the extension. You pay interest on any unpaid balance from April 15th, the original filing date.)
Any housing in kind or housing allowance must be included in gross income for US tax purposes. You then have to decide between taking the housing exclusion or the foreign housing deduction against this income. Again, the instructions for form 2555 provide more details on this.
Cheers,
Bev