Taxes when repatriating to the US

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Taxes when repatriating to the US


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Old 23rd January 2012, 09:41 AM
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Default Taxes when repatriating to the US

I have a question on tax liability when moving BACK to the US.

The situation: I am a US citizen living abroad, and have been away for about 7 years. I have met the bona fide residency test each year and have filed as such. I am paid in EUR and am localized in Germany, so I also claim the Foreign Tax Credit.

My family and I are planning to move back to the US this year. For simplicity, lets say July 1 (50% of the tax year).

Will I be able to claim a proportional Foreign Earned Income Credit on that first 1/2 of the year, or do I not meet the criteria because I will not meet the bona fide residency test for the 2012 tax year?

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Old 23rd January 2012, 10:00 AM
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Hi Ephain

I am not sure if you can take the Foreign Earned income Exclusion (for which you need to meet the bona fide residency test) but you will definitely be able to use foreign tax credits, which require no test. See IRS form 1116.

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Old 23rd January 2012, 11:24 AM
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Check the instructions in Publication 54, but your income earned while resident in Germany should be eligible for the FEIE. The "catch" is that, if you move back on July 1st (your example), your FEIE will be limited to 182/366 (2012 is a leap year) of the max amount ($92,500 I think - but check that) - or $45,997.

You can still take the foreign tax credit on any "excess."
Cheers,
Bev

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Old 23rd January 2012, 12:07 PM
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Quote:
Originally Posted by ephain View Post
I have a question on tax liability when moving BACK to the US.

The situation: I am a US citizen living abroad, and have been away for about 7 years. I have met the bona fide residency test each year and have filed as such. I am paid in EUR and am localized in Germany, so I also claim the Foreign Tax Credit.

My family and I are planning to move back to the US this year. For simplicity, lets say July 1 (50% of the tax year).

Will I be able to claim a proportional Foreign Earned Income Credit on that first 1/2 of the year, or do I not meet the criteria because I will not meet the bona fide residency test for the 2012 tax year?

Note you may have residual pension rights in Germany. Those rights and related benefits may be totalized with US Social Security, pursuant to a totalization agreement between the countries.

Depending on the details, this may or may not benefit you at retirement, but keep it in mind.

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