Scenario - Us citizen working in India - Need US tax info

[desimalad]

I am a US citizen. I am working in India for an Indian firm since 1/1/2008 and will continue to work for the next few years.

I need some help wrt US tax

Here are my income details for 2008
a) India salary/wages - Rs. 40,00,000 (In USD this is approx 100,000 K)
b) India bank interest - Rs. 40,00,000 (In USD this is approx 100,000 K)
c) US bank interest - 2,000 USD

So my total income is 202,000 USD.

On item a) and b) I am paying tax to India as this is income earned in India. This is approx 20% which is Rs. 16,00,000 ((In USD this is approx 40,000 K)


I have multiple questions wrt US tax
a) How do foreign earned income exclusion and foreign tax credit works in above scenario?
b) What works best to my advantage?
c) Approx how much I will have to pay as US tax?
d) Can I make use of foreign earned income exclusion and foreign tax credit for 2009, 2010 etc...I mean year after year?

[YaGatDatRite]

This is an expat information forum, not a tax advisory service.

For such specific tax related advice, you're better off contacting a tax professional in your area, or in the US.

Perhaps the Mods can move this to US forum .

[synthia]

I moved this here because quite a few American expats come to the forum.

Basically, you have to file a US tax return. I think you know that. You should be able to claim a tax exclusion for the first $80,000 of earned income, and have to pay taxes on the rest. You will also owe taxes on all your interest income. You may be able to take a credit for some of the taxes you pay in India.

If you are on an expat package, you should have gotten tax preparation as part of the package. So you need to get one on your own. All we can give you is what we know from our own experience.

All the forms and instructions are on the irs website, if you want to struggle through it on your own.

[Bevdeforges]

Originally Posted by desimalad

I have multiple questions wrt US tax
a) How do foreign earned income exclusion and foreign tax credit works in above scenario?
b) What works best to my advantage?
c) Approx how much I will have to pay as US tax?
d) Can I make use of foreign earned income exclusion and foreign tax credit for 2009, 2010 etc...I mean year after year?

Take a look at the IRS website - form 2555. That will give you the process for calculating the foreign earned income exclusion. Basically, you can exclude the first $85,000 or so of your foreign earned income. You wind up declaring and paying tax on the bank interest - whether it's in India or the US. But, if you're paying taxes in India, there is also the foreign tax credit you can take against US taxes assessed against any income you can't exclude.

The only caveat about taking the foreign tax credit is that it will probably kick you into the AMT (alternative minimum tax) calculation, which is a pain in the butt, but shouldn't cause you too many problems.

You can continue to use the Foreign Earned Income Exclusion and the Foreign Tax Credit as long as you are living outside the US and paying taxes to a country other than the US.

You also should get a copy of Publication 54, which explains all this stuff (and lots more) for US citizens living overseas. Once you have filed from overseas, they'll send it to you automatically.
Cheers,
Bev

[synthia]

How reliable is incoming mail in India?