# American possibly moving to Dubai (tax question):



## Going2Dubai

Tell me if I understand this correctly:

Is all income earned there tax exempt or is it dependant on how long I'm there or how much I make total...?

If I'm gone for 5 years, for example, and had $250,000 saved up before I returned to the US, do I have to pay taxes on it when I return?

How about Social Security (since US employers pay 1/2), do I have to pay it all?


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## Bevdeforges

Hi, and welcome to the forum.

As an American, you are subject to US income taxes wherever you live in the world. As an overseas resident, you are eligible for the Overseas Earned Income Exclusion - which is something in the area of $87,000 (it changes year to year) you can exclude from your income each year (using form 2555 - you still have to report your worldwide income). Anything above that you apply Foreign Tax Credits, but since there is no income tax in Dubai (or so I hear), you have no tax to credit against your US tax liability, so you actually pay taxes on it.

Social security depends on your situation. If you are working for a US employer and the employer withholds it for you, there is nothing further to do. (In the case of a temporary assignment overseas, some employers will continue to withhold US SS in order to keep you in the system while you are overseas.) If your employer doesn't do this, you just lose those years in the US SS system.

For details, see IRS Publication 54.
Cheers,
Bev


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## Going2Dubai

Hi there, and thanks for your reply:

I would be working for Emirates Airlines, if I get the job.

Do you know if I have to place a value on provided housing (and count it as income)?

Also, let's say I made $100,000. Am I taxed as if I made $13,000 in the United States (ie: I can take my standard deductions, etc, against the $13,000) or I'm I taxed at the tax bracket associated with someone who made $100K, but only on the last $13,000 with no deductions or credits for my wife and children?

I know this may really start to get deep, but do I have to file for state as well?


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## Bevdeforges

Ok, working for Emirates Airline means that you won't have the option to stay with US Social Security - though that's not a real problem.

If the employer is providing housing, yes you have to declare the value of it as income for the US tax return - but there is (on top of the overseas earned income exemption) a housing exclusion. (Explained in greater detail in pub 54.)

Now for the bad news <g> - they recently changed the tax calculation for those of us taking the overseas earned income exclusion. (Complicated it a bit, of course.) You have to take all your "usual" deductions against you whole worldwide income and then allocate them between the part of your income that is exempted (including the housing allowance) and the part that is left over.

Vastly simplified, if you made, say $100,000 and exempted the full $87,000 (forget the housing allowance for the moment), you'd calculate the tax on the $100,000 with all your usual deductions as if you were still back home. Then, you'd calculate the tax on the $87,000 with 87% of your usual deductions and allowances and subtract that from the tax on the full amount.

In practice it's a bit more complicated, and chances are you'll run up against the AMT (alternative minimum tax) calculation, too, in the process. But the net result is basically that you pay tax only on that $13,000 "excess" but at the rates for someone with $100,000 of income.

Again, that's only a very general overview of how it works. But to end on a positive note, no you shouldn't have to file a state return once you are resident overseas and qualify for the overseas earned income exemption (unless you have business interests of some sort back in the States that require you to file a state return on a non-resident basis). 

It sounds horribly complicated, but once you go through the forms once or twice, they become fairly easy to fill out. Filing electronically may not be possible from overseas, due to the restrictions some of the software vendors put on their e-filing, but that's nothing you can't resolve with a postage stamp. Oh, and if you are resident overseas, you automatically get a two month extension for filing. Overseas returns are due June 15th each year. The first year is the killer because of the transition rules, but once you get through that it becomes much easier.
Cheers,
Bev


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## cairogal

Bevdeforges,

Just to clarify, when I move in August of this year I will have to pay taxes next April on the money earned between August-December 2008, correct? 

How long does it take to establish bonafide residence? 365 days w/o returning to the US? 

So the housing is figured into the total taxable income?


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## Bevdeforges

cairogal said:


> Just to clarify, when I move in August of this year I will have to pay taxes next April on the money earned between August-December 2008, correct?
> 
> How long does it take to establish bonafide residence? 365 days w/o returning to the US?
> 
> So the housing is figured into the total taxable income?


If you move in August, you have two options for filing for 2008:

One, you file by April 15th like usual, with no credit claimed for living overseas (i.e. because you will not have established residency in Dubai for US tax purposes at 31 December). Then, after August, 2009, you file an amended return, applying your overseas earned income exemption to your earnings from August to December, 2008 and wait for your refund.

The second option (and frankly, the one most people go for) is to file for an extension in April, 2009 for filing your 2008 returns. The reason you give is that you are in the process of establishing your overseas residency and after August, you will be eligible to take the earned income exemption. You then file your 2008 return within 2 months (I think it is, might be 3) of the date you have resided in Dubai for a full year.

The actual requirement is something like 330 days (check pub 54 or form 2555 instructions) - which means in that first year, you can actually be back in the US for 30 days or so for business or visiting. Or you can wait until you have spent an entire calendar year (without home visits) overseas - just apply for extensions on the time to file until you have fulfilled the requirement. (You do have to apportion your income for the split year, and you are supposed to send in a check for what you think you owe when you request the extension. You pay interest on any unpaid balance from April 15th, the original filing date.)

Any housing in kind or housing allowance must be included in gross income for US tax purposes. You then have to decide between taking the housing exclusion or the foreign housing deduction against this income. Again, the instructions for form 2555 provide more details on this.
Cheers,
Bev


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## cairogal

Great help, Bev!


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## CRJDOG

I too am also looking into Emirates . I have applied and I attended the road show in Denver CO. on may 20th. I have been really interested in this tax thing as well. I have a few rental properties as well as my current house that would become a rental if I left for Dubai. I am just trying to figure out if I could shelter my income further by setting up my rentals as a buisness and depriciating them. 87,000 just isn't going to be enough to cover the base pay,bonus , and housing. Especially in a few years when you upgrade and get a raise. It looks like if you stayed there for 7 or more years you could be taxed in a tax bracket like you made 200000 plus. this could really change the appeal of moving to Dubai for Emirates if you take that into account along with the issue of inflation in Dubai somewhere in the 10% range. Anyone have any ideas how to shelter income from taxes back in the US beyond the 87,000? How helpfull is rental property tax write offs? Will this pose a problem with residency? What about claiming less on my w2? How does the IRS know what I make if my employer is from Dubai? Also did you get the job or are you just interested? Where are you from? Airline? I work for SkyWest based in Denver.


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## Bevdeforges

CRJDOG said:


> I have a few rental properties as well as my current house that would become a rental if I left for Dubai. I am just trying to figure out if I could shelter my income further by setting up my rentals as a buisness and depriciating them. ... How helpfull is rental property tax write offs? Will this pose a problem with residency? What about claiming less on my w2? How does the IRS know what I make if my employer is from Dubai?


One of the great disadvantages to US citizenship is that you remain subject to US taxation your entire life. And not to spook you further, but every few years Congress threatens to do away with the overseas earned income exemption - section 911 of the tax code. The only recompense we get is that we are allowed to vote in federal elections (president, US senate, US congress) from overseas indefinitely - and of course we don't have to go through the visa hassle when we want to visit back home.

Rental property is not a great tax dodge. Yes, you can take depreciation, which will help - however depreciation will lower the basis of the property so that your gain is just that much higher when you sell. And if you later move back to the property you have been renting out, it can complicate the whole issue of using it as your primary residence (at least for tax purposes). Putting your property into a corporation might help somewhat - but be careful how you withdraw money from the corporation, what with double taxation of dividends and what not. You may want to check with a lawyer or property management company to see what they can do for you in that regard. (Obviously, their services aren't free.)

If you're working in Dubai, you won't have a W2. Granted, what you declare on your tax return as income is pretty much up to you - BUT the IRS does have ways of checking and comparing what you declare with sources overseas. Don't know about Dubai, but many European countries do share tax and bank records with the IRS. And there is the practical matter of the statute of limitations - normally the IRS has a limited period of time (I think it's 4 or 6 years now) to contest anything you have declared on your return. For income not reported, there is no statute of limitations - which means they can come back at you at any time, even after your death (usually when your inheritance tax return or final income tax return is filed by your estate).

There is the possibility of renouncing your US citizenship, but there are penalties for doing so "for tax purposes." The most recently enacted of these is that they will require you to file one "final" tax return whereby you recognize a hypothetical sale of all your worldly assets so you can pay capital gains on everything. There's also the little matter that, having renounced your US citizenship they "may" deny you any form of visa to enter the US ever again. (Not that they will, just that they have that threat to hang over you any time you want to return.)

Bottom line is that, for US citizens, you aren't going to be able to enjoy tax free income no matter where you live in the world. This hits those who work for the "international civil service" too - organizations like the UN where salaries are normally tax free in the country the agency is located.
Cheers,
Bev


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## CRJDOG

Thanks Bev,
Wow kinda a dissapointment! I was hoping to shelter some of it. Any ideas? Anyone else out there doing anything to shelter their wages?


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## Iron Horse

Be proud to pay your taxes to be a citizen of such a great country! My employer, which is a US company, currently takes out all federal and state and other miscellaneous taxes and I have no issues with them doing so. I was told I should declare my residence in one of the states that don't have a state tax such as Texas, Florida, Nevada, or Wyoming because chances are I wouldn't see this money in my pocket again. Yet I decided to leave my residence in Colorado. I approached it from a few different angles. One, it's the right thing to do. Two, when I return one day to my state I hope my money helps to make a difference. Three, it's easier than trying to play a game with the IRS as I have nothing to hide from when I file.


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## Monalisa

Bev, 
I hope I would get some additional feedback.
I am so glad to see your replies,you definitely know what you are talking about.
I am a US citizen moving to Dubai in July with my son.
My husband will stay in the US for now with my other son.
We usually file jointly.
What do you suggest we do in this case?
If I am paying rent,do you get any deductions for it?
I am totally at a loss when it comes to taxes!I do not want to mess up on this one!
Thank you for taking the time to explain it step by step!


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## Bevdeforges

Monalisa said:


> My husband will stay in the US for now with my other son.
> We usually file jointly.
> What do you suggest we do in this case?
> If I am paying rent,do you get any deductions for it?


The first filing from overseas is generally the worst. Then, it falls into a rhythm and actually becomes rather easy.

You may want to start looking at Publication 54 from the IRS. (Download it from the IRS website - or use the coupon in your tax booklet from last year to order a copy in printed form.)

AFAICT, you can probably still file a joint return, however you may need to file for an extension until you have established your residency in Dubai (i.e. have been living there for a full year) so that you can claim your overseas earned income exclusion. Or, you file a joint return that first year without taking the exclusions, and then file an amended return after you have established your overseas residence and your right to the exclusion. If DH joins you later, you may have to do the same thing in that year to establish DH's right to the exclusion (assuming he is working there - each one of you can claim your own overseas earned income exclusion).

Depending on how much income you are earning in Dubai, you may be able to take the overseas housing allowance for rent you pay while there (and for other living expenses). See the instructions for form 2555 for the details.

It will definitely complicate your tax situation. Now, with regards to your state income taxes, that's anyone's guess. Some states won't let you file separately if you file a joint federal return - but technically, in your case, you would not have state residence while you are out of the country. Depending on how your state does things, you may want to file separately for federal, so that your Dubai income won't get hit for state income tax.
Cheers,
Bev


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## COPO

Bev,

Do I understand it corrrectly that if I have relocated full time to Dubai and am working for a non-US employer, than there is no Soc. Sec. or Medicare, or State tax liability? Only tax payable by me would be US Federal less the $87K exclusion and the ~ $13K housing exclusion? 

If my employer does not have a retirement plan, are there some retirement planning strategies to shelter income? Would I have to make 1/4 ly estimated tax payments since income will be in the $300K range?

Anyone firm you could reccommend in Dubai for tax planning advice? 

Thanks in advance.


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## Monalisa

Copo,
I guess the firm we should talk to should be in the states.
I am waiting for recommendations if anybody is familiar with one.
little off topic,I would love to know what are the jobs that pay this kind of money
My son just started college yesterday and I want to make sure he knows what jobs are financially rewarding and in demand these days!!!I graduated 20 years ago and it is a little too late for me!!
Enjoy Dubai, I am definitely going to do so.


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## COPO

There are numerous jobs that pay quite well. Investment Banking or Real Estate Development are two that come to mind and are in high demand particularly in the gulf states these days. I received an undergrad degree in civil engineering followed by an MBA in Finance. Although the best advice is do something you enjoy.


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## Bevdeforges

COPO said:


> Bev,
> 
> Do I understand it corrrectly that if I have relocated full time to Dubai and am working for a non-US employer, than there is no Soc. Sec. or Medicare, or State tax liability? Only tax payable by me would be US Federal less the $87K exclusion and the ~ $13K housing exclusion?
> 
> If my employer does not have a retirement plan, are there some retirement planning strategies to shelter income? Would I have to make 1/4 ly estimated tax payments since income will be in the $300K range?
> 
> Anyone firm you could reccommend in Dubai for tax planning advice?
> 
> Thanks in advance.


Even if you're working for a US employer in Dubai, if you're established over there as a Dubai resident (see IRS pub 54 for details about residency), you can avoid FICA and State taxes on your income. If you return to the US for retirement, you'll be lacking the quarters to qualify for Social Security and Medicare, but you only need 40 quarters these days to qualify. (If you continue to hold property in the US, you may get hit for state taxes for any income your in-state property generates - but on a non-resident basis.) The housing exclusion has to be justified with a list of the housing expenses you incur, but basically yes, that is excludable from your taxable income up to whatever the current limit is.

For retirement plans, you can still contribute to an IRA to the extent that you have taxable earned income on your US return (which it sounds like you will). And actually, for the part of your Dubai salary that is subject to US taxes, you have most of the same sorts of income shelters available - all your usual deductions from income (e.g. mortgage interest, health care expenses) though these will be apportioned between your taxable income and your excluded income.

And yes, if you're not having withholding taken out of your pay, you will have to do quarterly estimated payments to avoid interest and penalties when you file your taxes.

I'll have to leave it to the folks in Dubai to suggest a tax advisor familiar with US taxes.
Cheers,
Bev


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## Monalisa

You are very right about doing what he enjoys.
My son is not 17 yet and is verrryyyyy undecided on what he wants.That is why I thought he would welcome suggestions(I think he wants me to leave him alone, but you know moms
I wouldn't mind him finding what he likes among those kind of jobs.
I am in the education field and a licensed real estate agent on the side.


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## 4theluvofthegame

*sorry to bug you*

Hey Bev,
I'm new to the site but I've been reading up on your replies and you seem to be the most seasoned regarding US tax laws. I have accepted a job for a company that is moving to Dubai in Jan. The office will be open Feb 1st. I noticed you said you have to be there 330 days. The company deals in commercials and we do have some companies in the US, L.A mostly that we contract our work through. I would need to be there on some of those occasions. Doing so may put me at risk of being in Dubai for less then the 330 days though I would be there for work related purposes I dont know if that null and voids my exemption from the first 85,500. And do I need to be recorded as making a salary for the full 330 days? I will be arriving january 5th, and the company is planning to open on the 1st of Feb. So would I need to start being paid as soon as I land? Does all of that only start to take affect when I've completed and received my work Visa? Basically, when does the 335 day counter start? Just so I know how to plan ahead of time to make sure I'm within all rules and guidelines. I'm mainly going to save money to bring back to the states, and this would be a shame if I left my life in L.A. for a year then realized that money I thought I saved actually belongs to someone else. *sigh* I'm just a little nervous about the 330 days thing (in case you couldnt tell). Also, If I'm paying for my own housing (I think you answered this but I wasnt totally certain if it was the same question or not, please excuse my ignorance in this matter.  ) do I have the abiiity to deduct that from my total income earned along with commuting costs and other deductions that would go along with contract work? I think I will only be there a year, does that have any impact on the situation as well? Thanks so much in advance Bev, I look forward to your response.





Bevdeforges said:


> Even if you're working for a US employer in Dubai, if you're established over there as a Dubai resident (see IRS pub 54 for details about residency), you can avoid FICA and State taxes on your income. If you return to the US for retirement, you'll be lacking the quarters to qualify for Social Security and Medicare, but you only need 40 quarters these days to qualify. (If you continue to hold property in the US, you may get hit for state taxes for any income your in-state property generates - but on a non-resident basis.) The housing exclusion has to be justified with a list of the housing expenses you incur, but basically yes, that is excludable from your taxable income up to whatever the current limit is.
> 
> For retirement plans, you can still contribute to an IRA to the extent that you have taxable earned income on your US return (which it sounds like you will). And actually, for the part of your Dubai salary that is subject to US taxes, you have most of the same sorts of income shelters available - all your usual deductions from income (e.g. mortgage interest, health care expenses) though these will be apportioned between your taxable income and your excluded income.
> 
> And yes, if you're not having withholding taken out of your pay, you will have to do quarterly estimated payments to avoid interest and penalties when you file your taxes.
> 
> I'll have to leave it to the folks in Dubai to suggest a tax advisor familiar with US taxes.
> Cheers,
> Bev


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## amaslam

Hi:

The counter starts from the day you leave the USA. A tax year is Jan 1 - Dec 31 each year. And if you have less than the 330 days then you get into fractional calculations on all the income and deductions (i.e. 262/330 or 262/365 * X) on your tax forms. I recommend that you keep track of the dates you are in the US and date you are outside the US and then when it comes to doing the tax returns hand the list of dates to your tax person (I have a headache just thinking about doing those fractional calculations). If you feel extra nice you can calculate the number of days for your tax person. 





4theluvofthegame said:


> Hey Bev,
> I'm new to the site but I've been reading up on your replies and you seem to be the most seasoned regarding US tax laws. I have accepted a job for a company that is moving to Dubai in Jan. The office will be open Feb 1st. I noticed you said you have to be there 330 days. The company deals in commercials and we do have some companies in the US, L.A mostly that we contract our work through. I would need to be there on some of those occasions. Doing so may put me at risk of being in Dubai for less then the 330 days though I would be there for work related purposes I dont know if that null and voids my exemption from the first 85,500. And do I need to be recorded as making a salary for the full 330 days? I will be arriving january 5th, and the company is planning to open on the 1st of Feb. So would I need to start being paid as soon as I land? Does all of that only start to take affect when I've completed and received my work Visa? Basically, when does the 335 day counter start? Just so I know how to plan ahead of time to make sure I'm within all rules and guidelines. I'm mainly going to save money to bring back to the states, and this would be a shame if I left my life in L.A. for a year then realized that money I thought I saved actually belongs to someone else. *sigh* I'm just a little nervous about the 330 days thing (in case you couldnt tell). Also, If I'm paying for my own housing (I think you answered this but I wasnt totally certain if it was the same question or not, please excuse my ignorance in this matter.  ) do I have the abiiity to deduct that from my total income earned along with commuting costs and other deductions that would go along with contract work? I think I will only be there a year, does that have any impact on the situation as well? Thanks so much in advance Bev, I look forward to your response.


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## 4theluvofthegame

Thanks amaslam, 

So if youre doing fractions then I would assume that you divide that number of days you were in the states by the total days in the year and multiply that by the 85,500? or the total amount earned? I read that the tax brackets start at 85,500. So theoretically if I made 100K and I was only in dubai for 320 days, do you have an idea as to what I would have to pay? 




amaslam said:


> Hi:
> 
> The counter starts from the day you leave the USA. A tax year is Jan 1 - Dec 31 each year. And if you have less than the 330 days then you get into fractional calculations on all the income and deductions (i.e. 262/330 or 262/365 * X) on your tax forms. I recommend that you keep track of the dates you are in the US and date you are outside the US and then when it comes to doing the tax returns hand the list of dates to your tax person (I have a headache just thinking about doing those fractional calculations). If you feel extra nice you can calculate the number of days for your tax person.


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## amaslam

Don't forget the fraction affects all of the deductions, allowances, exemptions and income.

So the exemption (let's say it's 87000) is fractionalised also.

I want to REALLY REALLY say it's: ((numForeigndays) * 87000) / 365 

But at this point I'm dialling my tax person because you have to do this sort of thing to all of your numbers. And even more complicated when you have to also file some state return for the same year (part year resident rules and such)



4theluvofthegame said:


> Thanks amaslam,
> 
> So if youre doing fractions then I would assume that you divide that number of days you were in the states by the total days in the year and multiply that by the 85,500? or the total amount earned? I read that the tax brackets start at 85,500. So theoretically if I made 100K and I was only in dubai for 320 days, do you have an idea as to what I would have to pay?


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## Bevdeforges

4theluvofthegame said:


> Hey Bev,
> I'm new to the site but I've been reading up on your replies and you seem to be the most seasoned regarding US tax laws. I have accepted a job for a company that is moving to Dubai in Jan. The office will be open Feb 1st. I noticed you said you have to be there 330 days. The company deals in commercials and we do have some companies in the US, L.A mostly that we contract our work through. I would need to be there on some of those occasions. Doing so may put me at risk of being in Dubai for less then the 330 days though I would be there for work related purposes I dont know if that null and voids my exemption from the first 85,500. And do I need to be recorded as making a salary for the full 330 days? I will be arriving january 5th, and the company is planning to open on the 1st of Feb. So would I need to start being paid as soon as I land? Does all of that only start to take affect when I've completed and received my work Visa? Basically, when does the 335 day counter start? Just so I know how to plan ahead of time to make sure I'm within all rules and guidelines. I'm mainly going to save money to bring back to the states, and this would be a shame if I left my life in L.A. for a year then realized that money I thought I saved actually belongs to someone else. *sigh* I'm just a little nervous about the 330 days thing (in case you couldnt tell). Also, If I'm paying for my own housing (I think you answered this but I wasnt totally certain if it was the same question or not, please excuse my ignorance in this matter.  ) do I have the abiiity to deduct that from my total income earned along with commuting costs and other deductions that would go along with contract work? I think I will only be there a year, does that have any impact on the situation as well? Thanks so much in advance Bev, I look forward to your response.


I doubt that I was the one to mention 330 days, since I don't normally mess with that rule.  There are two options for qualifying for the overseas earned income exclusion. One is the physical presence rule and the other is the bona fide residence rule. You use whichever one is better for you.

For your first year there, you either need to spend 330 days of 2009 outside of the US (business trips anywhere but the US still count as days outside the US) or you need to spend 12 consecutive months resident in Dubai. You're getting off easy, since you will arrive in January (date of arrival is what counts). If you arrive later in the year, you normally would ask for an extension in filing your taxes for 2009 until two months after the date you establish your first 12 months of residence.

You do have to report the number of days you are physically present back in the US, and if you were on business, you have to apportion your wages and pay US tax on what you earned the days you were in the US on business.

After the first year, which is usually apportioned between your US residence and your overseas residence, things get lots easier as long as you have established your primary residence overseas.
Cheers,
Bev


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## Bevdeforges

4theluvofthegame said:


> Thanks amaslam,
> 
> So if youre doing fractions then I would assume that you divide that number of days you were in the states by the total days in the year and multiply that by the 85,500? or the total amount earned? I read that the tax brackets start at 85,500. So theoretically if I made 100K and I was only in dubai for 320 days, do you have an idea as to what I would have to pay?


Take a look at form 2555 on the IRS tax site. They do break down the whole apportioning calculation for you and pretty much take you by the hand to do it.

The first year you do have to apportion up until the date you arrived, and like Amaslan says, the apportionment affects all your other deductions for income over and above the $87,000 (or so) limit.

They also have slipped in another calculation (on a worksheet in the instruction book) so that you don't just figure your taxes on what's left after you subtract the exclusion. The details are part of the instructions for form 2555. It's best to download publication 54, which is the complete set for forms and instructions for overseas resident US taxpayers.
Cheers,
Bev


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## Capt777Emirates

Bev....
I'm in Dubai but wife/house still in California. I've heard a BAD rumor that California FTB still requires us to pay taxes on my foreign income eg, California does NOT recognize the $87,500 foreign earned income exemption. 

Can you verify this to be true? 

Does this mean I have to file with Calif Franchise Tax Board even though I plan to file the delay with IRS this year to come under the full bonafide test for the exclusion?


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## Nickel

Capt777Emirates said:


> Bev....
> I'm in Dubai but wife/house still in California. I've heard a BAD rumor that California FTB still requires us to pay taxes on my foreign income eg, California does NOT recognize the $87,500 foreign earned income exemption.
> 
> Can you verify this to be true?
> 
> Does this mean I have to file with Calif Franchise Tax Board even though I plan to file the delay with IRS this year to come under the full bonafide test for the exclusion?


Gawd, I knew CA was going bankrupt, but....

If you find out this is true...... I can't believe the State where I was born could be so crappy. (CA also does a rap on people for residency - not like other states. Why do you think many corps go to NV??)

Sorry, I DO like CA - born and raised until 15 in the LA area. But, I truly hope you are mistaken.


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## Capt777Emirates

Yeah, same here. Born and raised and SORRY I was! 

What a crap state it has become thanks to the franchise tax board. 
I'm still awaiting an answer to this here on the forum as I can't find anything on google specifically about this.



Nickel said:


> Gawd, I knew CA was going bankrupt, but....
> 
> If you find out this is true...... I can't believe the State where I was born could be so crappy. (CA also does a rap on people for residency - not like other states. Why do you think many corps go to NV??)
> 
> Sorry, I DO like CA - born and raised until 15 in the LA area. But, I truly hope you are mistaken.


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## Bevdeforges

Capt777Emirates said:


> Bev....
> I'm in Dubai but wife/house still in California. I've heard a BAD rumor that California FTB still requires us to pay taxes on my foreign income eg, California does NOT recognize the $87,500 foreign earned income exemption.
> 
> Can you verify this to be true?
> 
> Does this mean I have to file with Calif Franchise Tax Board even though I plan to file the delay with IRS this year to come under the full bonafide test for the exclusion?


If the wife/house are still in California, you very possibly are considered "tax resident" in California based on the standard criteria for judging these things. It has been a long time since I lived in California, and when I moved I ran into problems on the sale of my house. I did find their taxpayer advocate service to be very helpful (and accessible online).

I would have the wife check with a tax adviser (CPA or enrolled agent) in California to see what your status is as far as resident or non-resident. It may be possible for you and your wife to file separately, based on her being a California resident and you being non-resident - but I wouldn't count on that.

I'll ask a California tax person I know and see what she can tell me. Watch this space!
Cheers,
Bev


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## md000

Capt777Emirates said:


> Yeah, same here. Born and raised and SORRY I was!
> 
> What a crap state it has become thanks to the franchise tax board.
> I'm still awaiting an answer to this here on the forum as I can't find anything on google specifically about this.



Just hire an accountant stateside. Its not *that* expensive and they take care of everything (I spend more on a single Friday brunch for my wife and I than I do for a whole year of accountant "work"). The laws are complex and changing - why not pay an expert?


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## Capt777Emirates

MD.....

What expat tax guy do you use in the states??? Do tell, because the few I've researched online are quoting about $250 for HALf an hour of consultation! That's $500/HOUR!! Can't imagine what their actual fee is to do our taxes. Probably several thousand US. 

I asked our normal tax guy if he did or was familiar with expat type taxes. He leans over to his book cabinet, pulls out a large book and starts looking thru it and says, "Yeah, I can do your expat taxes". I did NOT get a warm fuzzy from that

If you know of someone in the states who does this for less than what I mentioned, I'm interested... !





md000 said:


> Just hire an accountant stateside. Its not *that* expensive and they take care of everything (I spend more on a single Friday brunch for my wife and I than I do for a whole year of accountant "work"). The laws are complex and changing - why not pay an expert?


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## md000

Capt777Emirates said:


> MD.....
> 
> What expat tax guy do you use in the states??? Do tell, because the few I've researched online are quoting about $250 for HALf an hour of consultation! That's $500/HOUR!! Can't imagine what their actual fee is to do our taxes. Probably several thousand US.
> 
> I asked our normal tax guy if he did or was familiar with expat type taxes. He leans over to his book cabinet, pulls out a large book and starts looking thru it and says, "Yeah, I can do your expat taxes". I did NOT get a warm fuzzy from that
> 
> If you know of someone in the states who does this for less than what I mentioned, I'm interested... !


Post a couple of more times, then send me a Private Message.


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## Bevdeforges

md000 said:


> Just hire an accountant stateside. Its not *that* expensive and they take care of everything (I spend more on a single Friday brunch for my wife and I than I do for a whole year of accountant "work"). The laws are complex and changing - why not pay an expert?


I'd add one caveat to that - if you find a stateside tax accountant (or enrolled agent) make sure you ascertain beforehand that they have the knowledge and experience with expat issues *at both federal and state level.* Those folks tend to be few and far between, at least in my experience.

Normally, if you move overseas with your family, you no longer have a state residence, and thus no obligation to file or pay state income tax (other than for the part year when you move overseas). The case where the family stays in the US while the breadwinner is living overseas gets complicated real quick - because generally the states will try to apply their regulations for multiple states (i.e. if you live in Nevada, but work in California). Dubai further complicates the issue, especially in states that expect you to offset your state tax bill with tax credits from the "other" state.
Cheers,
Bev


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## Bevdeforges

Capt777Emirates said:


> Bev....
> I'm in Dubai but wife/house still in California. I've heard a BAD rumor that California FTB still requires us to pay taxes on my foreign income eg, California does NOT recognize the $87,500 foreign earned income exemption.
> 
> Can you verify this to be true?
> 
> Does this mean I have to file with Calif Franchise Tax Board even though I plan to file the delay with IRS this year to come under the full bonafide test for the exclusion?


OK, I checked with my California enrolled agent friend and she says that there is NO overseas earned income exclusion recognized for state tax purposes. Normally, due to your residence overseas, you simply wouldn't have to file a state tax return - but in your case, with your wife still resident in California, it's assumed that your overseas residence is "only temporary" so you still have to file a state tax return and pay California state tax on your worldwide income. Filing separately won't do anything for you.

I also re-read the instructions regarding the tests for the exclusion. They are deliberately vague on exactly what's necessary for the "bona fide resident" qualification - and it seems to imply that having your wife still resident in the US could complicate matters for you. (Of course they won't determine whether or not you pass the bona fide resident test until after you have filed your return claiming it.) You may want to consider filing under the physical presence test, if you will meet that one. (Though it means you will have to get an extension until after you have spent an entire tax year - i.e. a calendar year - in Dubai.)
Cheers,
Bev


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## Capt777Emirates

Bev,

Thanks so much for that information. Unfortunately, that is what I was afraid of. 

I will indeed file for the exemption this year and wait until I do meet the physical presence test of which I will have after the first of 2010, so at least I can get the larger tax burden lifted to the tune of the first $85,700. 

There's just no getting away from the state of California, is there!! 

Thanks again,

Captain.


Bevdeforges said:


> OK, I checked with my California enrolled agent friend and she says that there is NO overseas earned income exclusion recognized for state tax purposes. Normally, due to your residence overseas, you simply wouldn't have to file a state tax return - but in your case, with your wife still resident in California, it's assumed that your overseas residence is "only temporary" so you still have to file a state tax return and pay California state tax on your worldwide income. Filing separately won't do anything for you.
> 
> I also re-read the instructions regarding the tests for the exclusion. They are deliberately vague on exactly what's necessary for the "bona fide resident" qualification - and it seems to imply that having your wife still resident in the US could complicate matters for you. (Of course they won't determine whether or not you pass the bona fide resident test until after you have filed your return claiming it.) You may want to consider filing under the physical presence test, if you will meet that one. (Though it means you will have to get an extension until after you have spent an entire tax year - i.e. a calendar year - in Dubai.)
> Cheers,
> Bev


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## 4theluvofthegame

*california resident qualifications*

Hey Bev, its been a while since I've been on and you originally helped me. Well I made it over here and Ive been here now for about a week. Just going through the process of looking for a place. Thanks again for your original help. Youve been more then helpful so far. I have a question for you. I'm keeping my apartment in L.A. I'm not married but I will be renting out half of the apartment to someone for the month of feb. Then in March the whole apartment will be rented. I will be here for the full 330+ required days to be considered for the tax exemption but does me keeping my place in L.A. still consider me a resident of CA? I left 11 post dated checks to pay the rent and the people renting are going to be wiring me the money into my account. Though I still have everything in my name. Would this put me in that category to pay CA state taxes? or is there a loophole to get through it? If so what is the percentage one would have to pay out of the salary so I can budget for my own personal with holdings. Thanks again in advance Bev.




Bevdeforges said:


> OK, I checked with my California enrolled agent friend and she says that there is NO overseas earned income exclusion recognized for state tax purposes. Normally, due to your residence overseas, you simply wouldn't have to file a state tax return - but in your case, with your wife still resident in California, it's assumed that your overseas residence is "only temporary" so you still have to file a state tax return and pay California state tax on your worldwide income. Filing separately won't do anything for you.
> 
> I also re-read the instructions regarding the tests for the exclusion. They are deliberately vague on exactly what's necessary for the "bona fide resident" qualification - and it seems to imply that having your wife still resident in the US could complicate matters for you. (Of course they won't determine whether or not you pass the bona fide resident test until after you have filed your return claiming it.) You may want to consider filing under the physical presence test, if you will meet that one. (Though it means you will have to get an extension until after you have spent an entire tax year - i.e. a calendar year - in Dubai.)
> Cheers,
> Bev


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## lexluthor

*Theoretical US tax calculation*

Hi Bev - You seem to be the relevant expert, and I'm trying to get a grasp of US taxes for working in Dubai... Can you please help me with a theoretical calculation:

For a theoretical salary of USD 160k in 2009 with full days residency in UAE:

Income: 160k
Less FEIE: (90k)
Less Housing: (44k) assuming rent + bills is in excess of this figure

Taxable income: 26k

Calculate approx rate:
Using schedule X, tax is 16750 + 28% of amount over 82250
>> 16750 + (160000-82250)0.28 = 16750 + 21770 = 38520
Therefore approx blended rate is 38520/160000 = 24%

Giving me tax due of 26k x 0.24 = USD 6259

Is this right? Doesn't seem too bad.

Thanks for anyone who can comment!


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## Jynxgirl

Find an accountant around a military base. They deal with ex-military who are working overseas in large numbers and are very knowledgable about the tax laws.


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## Bevdeforges

lexluthor said:


> Hi Bev - You seem to be the relevant expert, and I'm trying to get a grasp of US taxes for working in Dubai... Can you please help me with a theoretical calculation:
> 
> For a theoretical salary of USD 160k in 2009 with full days residency in UAE:
> 
> Income: 160k
> Less FEIE: (90k)
> Less Housing: (44k) assuming rent + bills is in excess of this figure
> 
> Taxable income: 26k
> 
> Calculate approx rate:
> Using schedule X, tax is 16750 + 28% of amount over 82250
> >> 16750 + (160000-82250)0.28 = 16750 + 21770 = 38520
> Therefore approx blended rate is 38520/160000 = 24%
> 
> Giving me tax due of 26k x 0.24 = USD 6259
> 
> Is this right? Doesn't seem too bad.
> 
> Thanks for anyone who can comment!


Check the instructions for form 2555, but that's not quite how the tax works as I understand it. Basically, you have to take the tax on the full amount (i.e. the 160K less your allowable deductions), then apportion your deductions to the earned income exclusion and figure the tax on that amount. Subtract the tax on the income exclusion portion from the tax on the full amount and that's what you pay.
Cheers,
Bev


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## irti98

I am planning to move to UAE in August of 2011. My base would be around $84000. I would be getting approximately $30K for housing being paid by the company. Can anyone please tell me how much tax liability would be on me for 2011 and then for the full year 2012.


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## xchaos777

Hi,

I would suggest going to one of the online tax systems like Turbo Tax. Model it there, I don't think you have to pay unless you want to print forms, etc.

You might be able to do better with Tax professional but will give you a decent idea.


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## Jynxgirl

114k - the 90k (or there abouts) tax exemption for living outside the usa for 365 with only 30 days or less in country. 

So 24k... then start doing write offs


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## md000

As I've posted numerous times, all Americans over here should hire a proper tax accountant with experience in expatriate taxation. 

Relying on this forum for legal and tax advice is not a wise decision and could lead to fines or imprisonment. Don't mess with the U.S. IRS. 

-md000/mike


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## Barbalee

Nope, I'm not relying on the forum for tax advice, but I still have a question! Several posters have suggested filing for an extension and delaying US tax preparation until they meet the 330 or whatever # of days requirement. Huh? If one comes to Dubai for employment in the fall of 2011 and is filing taxes for 2011 in the spring of 2012, how would it help to wait until the summer of 2012 to file taxes for 2011? I'm obviously missing something...what is it?


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## Jynxgirl

Barbalee said:


> Nope, I'm not relying on the forum for tax advice, but I still have a question! Several posters have suggested filing for an extension and delaying US tax preparation until they meet the 330 or whatever # of days requirement. Huh? If one comes to Dubai for employment in the fall of 2011 and is filing taxes for 2011 in the spring of 2012, how would it help to wait until the summer of 2012 to file taxes for 2011? I'm obviously missing something...what is it?


It is not based on the calendar year but on your year period out of country that is not taxed up to that amount, if you meet all the requirements. You can file an extension or you can pay what taxes adds up on all your income for 2011, and then later submit and amendment to get that money back. If you are going to owe for 2011 even if the foreign income is taken out, you still have to pay those taxes on time or you will be penalized. This is the simple version though. Hence, you should get an accountant....


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## md000

Jynxgirl said:


> Hence, you should get an accountant....


Exactly!!!!!!

If you need one, message me privately and I will refer you to an honest tax accountant based in Denver.


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## Barbalee

Ah-ha~ Now I get it...well, sorta! Thanks!


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## Guest

A bit off topic for US citizens, but does any tax apply to Europeans in Dubai? Or are Europeans trully tax free?


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## KentyMac

It's been a few years since this original post, but I came across is as I too am a California resident who owns California property and am looking at moving to Abu Dhabi next month. After much research and talking to a couple of CPAs, it is indeed true that California is a giant suckhole of taxes. If you leave so much as a library card in California they will consider you a resident and demand state taxes on both income and money towards expenses such as housing. And if you ever want to move back to California, even after years overseas, then they'll take that as proof that your move from temporary and you were really a California resident all along. If I wasn't underwater on my house I'd just sell it, but I'm trying to avoid that.

There are four states that hose their state residents on foreign earned income, and California is at the top of the list with their hand out. However, I was told I can still claim deductions, depreciation, charitable contributions, etc to help minimize it but when you tack the housing money onto the salary that's a big chunk to whittle down.


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