Q&A: Are education assistance, housing, and vehicle benefits taxable income?

Posted by Don W on October 25, 2010 under Expatriate Taxes, First Time Filing as an Expat, Relocation and Taxes

Q: I’m getting transferred to the UAE and I can get up to $13,000 USD for education assistance for my elementary school daughter. Is this taxable income? What about housing and company car? I would appreciate your assistance.

A: Yes, the money would be included in your gross foreign income.  The same applies to housing and vehicle benefits. The easiest way to think about it is that anything that you would have had to pay with your own cash is taxable.

Q&A: How do we handle residency when we’ve left our US home to foreclosure?

Posted by Don W on October 10, 2010 under Expatriate Taxes, Relocation and Taxes

Q: In July 2009, we “walked away” from our Ohio home, deciding to leave it to foreclosure. As we are officially homeowners in the state of Ohio, until such time as foreclosure occurs, does Ohio still consider us as residents and subject to Ohio state taxes?

A: Residency, especially if you don’t have any economic ties to the state, is up to you. If you don’t intend to return to Michigan then you can renounce your statehood.

Q&A: Can we deduct moving expenses and mortgage interest/taxes abroad in our US return?

Posted by Don W on August 20, 2010 under Expatriate Taxes, Relocation and Taxes

Q: My wife is a dual Australian / US Citizen.  We are now residents of (and homeowners in) Australia. In June 2009, we incurred approximately $10,000 in moving expenses from Tennessee to Australia.  Are any of our moving expenses to Australia deductible? Does US Tax Code allow us to deduct any of the mortgage interest or taxes paid for our primary residence in Australia?

Also, my wife and I have spent only 10 days in the USA since July 2008, so for TY 2010, 330 Rule is assured. Given the benefit of US Taxes 330 Rule, is it better to file as a US Citizen and offset Australian tax liabilities against that filing?

A: For Federal purposes you can deduct your moving expenses. You can also deduct foreign mortgage interest on Schedule A.

As for filing, there is only one option –  all US citizens are required to report their worldwide income to the IRS each year.  You can get a tax credit for foreign taxes paid, but your US tax return is still your primary tax return (in the eyes of the IRS).

Q&A: I’ll be working in another country but paid by my company in the US– what do I need to know?

Posted by Don W on May 13, 2010 under Expatriate Taxes, Relocation and Taxes

Q: I would like some information regarding expatriate tax as related to my somewhat unique situation. My company is planning to send me to the Dominican Republic to work with our offshore partners. Here are the specifics of my situation:

  • I will be working in the Dominican Republic for 1-3 years
  • I will be paid by my company in the US
  • My company has not incorporated in the Dominican Republic
  • I will simply be working with companies in the DR but will be working for and getting paid by my company in the US.
  • I plan to travel to the US at least twice each year, probably around Christmas and the 4th of July.
  • What are my options? Thanks again in advance for any information you can provide.


A:
The MOST important thing to remember is whether or not you will qualify for the Foreign Earned Income Exclusion. That is where the 330 day rule comes from.

All the time you return for meetings, vacation, medical emergencies, etc. count against it.  Are you going to be paying taxes in the Dominican Republic? If so, you will also be eligible for the Foreign Tax Credit.

You can also find a great deal of information on our Expat Tax Basics page on our main site.

Q&A: It’s my first year abroad– how should I file back home, and how do I get an extension?

Posted by Don W on February 22, 2010 under Expatriate Taxes, First Time Filing as an Expat, Relocation and Taxes

Q: This is my first year abroad and I have been away since April 2009. I was a resident of Oregon in the beginning of 2008 then California as of May 2008. What do i need to do/know to file taxes? Do I automatically get the extension for filing or do i need to file by April 15th since its my first year?

A: From your email it looks like you will need to file Part Year Resident returns in both states.  It would depend on income generated in each state, if any, etc.

All US citizens are required to report their worldwide income to the IRS on their tax return. The two primary forms required for expat returns, in addition to the usual Form 1040, etc., are Form 2555 (PDF) – Foreign Earned Income Exclusion (instructions) and Form 1116 (PDF) – Foreign Tax Credit (instructions).

Yes, you get automatic a 2 month extension until June 15th. However, if you want to extend until October you will need to file for extension by April 15th. Make sure to check with each state to see if they accept the federal extension or whether you need to file an extension with the state as well. Filing an extension is never a bad idea for expats—gives you time to decide what you are going to do.