My question is: US-specific
QUESTION: Does a US citizen earning $200,000.00 US in Dubai have to
pay any taxes on the money earned when he returns?
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david ingram replies:
US citizens are taxable on their world income where ever they work and
regardless of where the money is paid from and regardless of the reason for
which it is paid. The only exception would be a property settlement or
child support from a divorce and sometimes there may be a reliever, but the
income is still reportable before the deduction or exemption.
An American is allowed to earn up to $80,000 per year and exempt it by
filling out Form 2555. To qualify for form 2555, the individual must have
been in the foreign country for 3330 out of 365 days or have lived in the
foreign country for an entire calendar year.
Assuming you are single and an employee ( maybe the manager of a Dubai or
Kuwait or Qatar hotel, a salary of $200,000 US would earn a US tax bill of
about $26,000 but would mean that you had not paid into Social Security and
would get a smaller pension on retirement.
If you were self-employed, you would have to pay social Security as well.
$200,000 of self-employment (after the $80,000 exemption) would be about
$16,250 Social Security plus $23,750 of Income Tax (the tax is smaller than
before because 1/2 of the $16,250 would be a tax deduction. (these are 2004
tax rates by the way).
Happy to help you with your returns.
Even though I am a Canadian in Canada, my favourite client is a US citizen
in Qatar, Dubai, Saudi Arabia or Kuwait. I have been doing those returns for
42 years now.
It is also very important that you file the returns on time which means June
15, 2006 for the 2005 tax return because you have an automatic extension
till June 15 (instead of April 15) when a US citizen resides out of the
country.
David Ingram's US/Canada Services
US / Canada / Mexico tax, Immigration and working Visa Specialists
US / Canada Real Estate Specialists
Home office at:
4466 Prospect Road
North Vancouver, BC, CANADA, V7N 3L7
Cell (604) 657-8451 -
(604) 980-0321 Fax (604) 980-0325
Calls welcomed from 10 AM to 10 PM 7 days a week (please do not fax or phone
outside of those hours as this is a home office)
email to taxman at centa.com <mailto:taxman at centa.com>
www.centa.com <http://www.centa.com/> www.david-ingram.com
<http://www.david-ingram.com/>
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