Tuesday, July 28, 2015

Are members of the African Union nations entitled to U.S. tax exemptions? Are U.S. Citizens entitled to income tax exemption while employed in AU member nations?



Exclusions From Income

Instead of taking the foreign tax credit, a U.S. expat may elect to exclude from gross income:
  • foreign earned income of up to $97,600 in 2013, and
  • foreign housing costs up to 30% of the maximum foreign earned exclusion (with possible adjustment based upon geographic location), reduced by a base amount ($15,216 for 2013).
You need pay no U.S. income tax on these amounts.
Example: Joseph lived and worked in London during 2013. He earned $150,000 and paid $36,000 in rent on a London flat. He may exclude $97,600 of his foreign earnings from his U.S. taxable income, plus claim a $8,784 housing cost exclusion ($36,000 - $15,216 = $8,784). This reduces his taxable income by $106,304.
You can elect to use either or both exclusions. They are available to each individual expat taxpayer, so, if eligible, each spouse may claim the exclusions even if a couple files a joint tax return.
Self-employed expats cannot claim the foreign housing exclusion. They must claim the foreign housing deduction instead.
To qualify for these exclusions from income, you must have foreign earned income, your tax home must be in a foreign country, and you must be one of the following:
  • a U.S. citizen who is a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax year
  • a U.S. resident alien who is a citizen or national of a country with which the United States has an income tax treaty in effect and who is a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax year, or
  • a U.S. citizen or a U.S. resident alien who is physically present in a foreign country or countries for at least 330 full days during any period of 12 consecutive months.

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