# US citizens working in Dubai - tax related question



## giants (Sep 23, 2008)

A question for US citizens working in Dubai: The IRS states any income over $85,700 is subject to federal income tax. If I recieve a housing allowance, transportation allowance, moving allowance, etc. Do I have to declare all of these allowances as taxable income or only my straight salary?

Do I still have to pay Social Security Tax, Medicare, State and City Income tax while over there? I heard from a friend that if you close all of your US bank accounts and you do not own a home, then you can declare yourself not a resident of any particular state. I don't know how much merrit this has.


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## qwert97 (Jun 2, 2008)

giants said:


> A question for US citizens working in Dubai: The IRS states any income over $85,700 is subject to federal income tax. If I recieve a housing allowance, transportation allowance, moving allowance, etc. Do I have to declare all of these allowances as taxable income or only my straight salary?
> 
> Do I still have to pay Social Security Tax, Medicare, State and City Income tax while over there? I heard from a friend that if you close all of your US bank accounts and you do not own a home, then you can declare yourself not a resident of any particular state. I don't know how much merrit this has.


Under US tax laws, anything that is received as allowance is considered as income in the hands of recipient.


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## Bevdeforges (Nov 16, 2007)

giants said:


> A question for US citizens working in Dubai: The IRS states any income over $85,700 is subject to federal income tax. If I recieve a housing allowance, transportation allowance, moving allowance, etc. Do I have to declare all of these allowances as taxable income or only my straight salary?
> 
> Do I still have to pay Social Security Tax, Medicare, State and City Income tax while over there? I heard from a friend that if you close all of your US bank accounts and you do not own a home, then you can declare yourself not a resident of any particular state. I don't know how much merrit this has.


As a US citizen, you are supposed to declare all your worldwide income to the IRS. This includes housing allowances, transportation allowances, moving allowances and the fair market value of a company car or other benefits in kind. You can exclude the first $85,700 (or whatever the current limit is) of earned income on form 2555. There is also a housing exemption (see Publication 54 for Overseas Residents for details).

The good news is that you don't have to pay FICA, nor state or city income tax if you qualify as being resident outside the US - again, see Pub 54 or the instructions for form 2555. (There are two ways to qualify for this - bona fide residence or the physical presence test.) You don't need to close all your US bank accounts and you don't need to ditch your US property.
Cheers,
Bev


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