# Foreign earned income tax worksheet... does not compute.



## TKarrade

So I'm 98% done with filing my 2011 taxes and I'm trying to make sense of the Foreign Earned Income Tax worksheet I need to use for line 44.

Background: I am married, and my wife was in Japan for part of 2011 working as a teacher. She met the physical presence test for being out of the country for 330+ days so that's fine and we did form 2555 for 2010 and I'm doing it again for 2011. 

Here's the the form is telling me to do: 
For 2011 our 1040 line 43 is showing* 52,656*
The amount on form 2555 is* 25,755*
Line 3 would then be *78,411*

So the tax on line 3 according to the tax tables is* 11,856.* 

Next we figure out the tax on line 2... according to the tax tables the tax we didn't have to pay on the 25,755 is *3,016.*

Then subtract line 5, from line 4 and you get the estimated tax I should pay, at *8,840*.

Here's where I want to point out a problem. The first value of 11,856 was based on a 25% tax bracket. The second value of 3,016 is based on a 15% tax bracket if we use the standard tables. That doesn't seem right to me. I understand that the government wants to tax me at a rate that matches my income, but shouldn't that also apply to the deduction calculation? 

If we would have made that extra 25,755 in the US, the taxes we would have paid would have been* 6,438* on that income, not the *3,016* that the table indicates. Am I missing something here?

I'm still getting a refund but it seems like there should be another way to calculate the liability if the foreign income is pushing you around between tax brackets.


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## TKarrade

Correction.

If we would have made that 25,755 in the US....

The first 16,343 of the 25,755 would have been taxed at 15%, which is a tax of *2,451.*
The remaining 9,412 would have been taxed at 25% which is a tax of *2,353.*

This means that the tax we didn't have to pay on the foreign income is *4,804. * Still higher than the form indicates.


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## Bevdeforges

It has changed in recent years, but what you pay in taxes when taking the FEIE is the difference between what you would have paid on your whole taxable income (without taking the FEIE) and the tax on the FEIE portion that you excluded.

In other words, they exclude the lower rated tax and leave you paying the upper bracket on the "excess." 

Cheer up - in Belgium the tax system is designed so that all your deductions come out of the lower brackets, so you wind up only paying the highest bracket on down. (Tricky to explain - but a very interesting way to do things!)
Cheers,
Bev


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