How would you handle UK National Insurance Contributions for U.S. tax purposes?
I am a bonafide resident of the UK making 86k GBP. I understand quite well how the foreign income exclusion works along with the foreign housing deduction. However, the NIC is a quandary to me. Do I have to report to the IRS my enitre gross income as Foreign Earned Income (FEI) (including the NIC amounts that have been directly debitted from my paychecks)?
Here's the example:
Gross income: 86,000 GBP/yr
National Insurance Contribution: 5100 GBP/yr
Is my FEI for U.S. tax purposes 86000 GBP or can I report only 80,900 GBP as FEI to reflect the NIC deduction? Seems only fair that I should be able to exclude NICs from FEI since Social Security is taken before tax on US earned income.
If I have to report the entire 86000 GBP as FEI, can I deduct the NIC any other way? I know I can take a tax credit for INCOME taxes paid, but NICs are not income taxes. I assume there is a different way to handle NICs. Schedule A?
Thanks in advance for your comments. By the time I am done filing this year, I may know more about FEI than most accountants!
I am a bonafide resident of the UK making 86k GBP. I understand quite well how the foreign income exclusion works along with the foreign housing deduction. However, the NIC is a quandary to me. Do I have to report to the IRS my enitre gross income as Foreign Earned Income (FEI) (including the NIC amounts that have been directly debitted from my paychecks)?
Here's the example:
Gross income: 86,000 GBP/yr
National Insurance Contribution: 5100 GBP/yr
Is my FEI for U.S. tax purposes 86000 GBP or can I report only 80,900 GBP as FEI to reflect the NIC deduction? Seems only fair that I should be able to exclude NICs from FEI since Social Security is taken before tax on US earned income.
If I have to report the entire 86000 GBP as FEI, can I deduct the NIC any other way? I know I can take a tax credit for INCOME taxes paid, but NICs are not income taxes. I assume there is a different way to handle NICs. Schedule A?
Thanks in advance for your comments. By the time I am done filing this year, I may know more about FEI than most accountants!