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HELP: How to handle National Insurance Contributions for US tax purposes

8818 Views 3 Replies 2 Participants Last post by  Bevdeforges
How can I deduct National Insurance Contributions on US Tax. Please refer to the following guidance:

IRS publication 54 (Americans Living Abroad): The deduction for foreign taxes other than foreign income taxes is not related to the foreign tax credit. You can take deductions for these miscellaneous foreign taxes and also claim the foreign tax credit for income taxes imposed by a foreign country.


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I've moved this post to the Expat Tax section, where I think it will attract more interest. Your question applies to more than just the British residents.

Simply put, you CANNOT deduct National Insurance Contributions on your US tax return - except for the portion that is related to health insurance, and then only if you meet the requirements for deducting health insurance on Schedule A (i.e. your deductible health care costs, including insurance, are more than 7.5% of your AGI).

All other deductible taxes are taken on the "Other Taxes" part of Schedule A. But read the instructions carefully (both for Schedule A and in Pub 54). Social security taxes are specifically NOT deductible, and in any event, National Insurance contributions aren't considered "taxes" by the IRS.

It's also important to understand that, if you are taking the FEIE (form 2555 - exclusion for foreign earned income), your deductions from Schedule A have to be allocated between your earned income excluded from taxation and the rest of your income. Generally, if your earned income falls under the maximum amount you can exclude (i.e. about $92K), then you wouldn't bother to itemize your deductions.
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Thanks Bev. You seem to know what you are talking about.

Can you tell me how to deduct or exclude a personal UK pension contribution?

Unless it's a recognized IRA or similar tax deferred plan, you can't.
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