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Old 7th February 2012, 10:13 PM
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Question?

I will be moving to Dubai in the end of March, my base wage is tax free up to $95,00.00 any wage above this I will be taxed on (correct?) I also will have a bonus program above my base wage. What will the amount be that I am taxed on? would I be taxed on (example) say after base wage and bonus money I make a total of $150.000 usd would I be taxed on $150,000 or just $55,000 usd. Also what types of write offs would I then be able to write off on my taxes? Thanks

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Old 8th February 2012, 12:54 AM
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You have some straight-forward questions. Unfortunately, the answers are much more complex.

First, you must declare your global income, say, $150,000 as wages and salary. Based on the facts and circumstances, primarily the substantial presence tests (SPT) for days present, you may qualify to exclude some portion.

SPT drives off the dates you leave the US, the dates you return, and how many days you were physically out of the US in a 365 day period which is your tax year for SPT, not necessarily a calendar year.

The amount of the Foreign Earned Income Exclusion is about $95,000, and may change from year to year.

Timing of these is important, witness the fact the SPT year is rarely a calendar year.

As far as deductions are concerned, the same deductions potentially apply, altho under some circumstances involving your employment relationship you may have a foreign housing allowance and deduction.

I've done taxes with numerous expats in Dubai. I have yet to have any with any meaningful deductions - the employer pays so much.

Best wishes ! ! !

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Steve Odem, IRS Enrolled Agent, Australian Registered Tax Agent. steve@katax.com
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Old 8th February 2012, 09:29 AM
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I've moved your post into a thread of your own, since you're asking about income and not necessarily the reporting of financial accounts.

The best way to understand how the taxation of overseas taxpayers works is to take a read-through of Publication 54, available on the IRS website for download. They have a few examples in there to show you how the allocation of the foreign earned income exclusion works your first year abroad (also how to figure your time for the physical presence test and apply for the appropriate extensions).

You don't get to deduct or write off anything that is already covered by the amount you are excluding under the FEIE. (Again, there are examples in Pub. 54). And basically, what you'd be taxed on with the figures you give is the difference in tax between $150,000 and the $95,000 you exclude, not the tax on the $55,000 difference. (Pub 54 reveals all.)

Now you know why they say that stuff about "death and taxes."
Cheers,
Bev

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