# Tax question from an American teacher



## sidirsi (Jan 25, 2014)

I'm considering taking a teaching position in Dubai. The company offering me the position is telling me that my income would be completely tax-free, which sounds a bit dodgy to me. If I am an American I still have to pay taxes, right? 

Also is (don't laugh) $2000 a month enough to live on in Dubai?


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## saraswat (Apr 28, 2012)

From earlier discussion on this topic, our U.S members based here have mentioned there being a certain threshold (USD 95 K per annum) that needs to be crossed for income to be taxed. 

Regarding the USD 2000 being enough to live on bit, that is hard to answer without knowing certain other things. For instance, whether you are single or married or married with children; if that amount would include residential and transportation expenses etc..


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## Fat Bhoy Tim (Feb 28, 2013)

sidirsi said:


> I'm considering taking a teaching position in Dubai. The company offering me the position is telling me that my income would be completely tax-free, which sounds a bit dodgy to me. If I am an American I still have to pay taxes, right?
> 
> Also is (don't laugh) $2000 a month enough to live on in Dubai?


Your income is tax free in the UAE, there are no local obligations.

You should send your tax returns to the IRS as normal. Should also send your Report of Foreign Bank and Financial Accounts (FBAR) to the Treasury, if your account has over USD 10,000 at any time during the year.

Between the foreign-earned income exclusion and standard deduction (nevermind itemised), you need to earn over $100k before you have any tax liability, and even then it's on the excess only. 

I send my 1040s and 2555-EZ (foreign earned income exclusion) every year, but I can't be bothered with the FBAR.


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## sidirsi (Jan 25, 2014)

Thanks for the replies. For what it's worth I'm single and somewhat frugal but I want to save money. About the taxes, my understanding is that I'd have to live in the UAE for 330 days before that tax break applies to me, right? I appreciate the help, and I apologize if this has been gone over before. I'm not great with taxes as it is, and I don't want to take the job and come home to some huge IRS headache.


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## Fat Bhoy Tim (Feb 28, 2013)

sidirsi said:


> Thanks for the replies. For what it's worth I'm single and somewhat frugal but I want to save money. About the taxes, my understanding is that I'd have to live in the UAE for 330 days before that tax break applies to me, right? I appreciate the help, and I apologize if this has been gone over before. I'm not great with taxes as it is, and I don't want to take the job and come home to some huge IRS headache.


I'm not sure if a full year is needed, or whether you record the exclusion on a pro-rated basis only. Can't help you there, I'm afraid.


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## mehranR (Jul 27, 2013)

sidirsi said:


> Thanks for the replies. For what it's worth I'm single and somewhat frugal but I want to save money. About the taxes, my understanding is that I'd have to live in the UAE for 330 days before that tax break applies to me, right? I appreciate the help, and I apologize if this has been gone over before. I'm not great with taxes as it is, and I don't want to take the job and come home to some huge IRS headache.


Thats correct.


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## indoMLA (Feb 6, 2011)

sidirsi said:


> I'm considering taking a teaching position in Dubai.  The company offering me the position is telling me that my income would be completely tax-free, which sounds a bit dodgy to me. If I am an American I still have to pay taxes, right?
> 
> Also is (don't laugh) $2000 a month enough to live on in Dubai?


Yes, the income is tax-free to you in the UAE, but you will have to pay taxes in the US since all world-wide income is taxable in the US. However, if you have claimed non-resident status, then all income under $91,700 can be excluded. This is called the Foreign Earned Income Exclusion - I have linked to some reading below.

About the $2,000 a month to live on. Is that the amount of salary being offered to you? If so, then I can tell you with a almost 100% certainty that the money/salary offered is NOT enough. However, this is subjective and everyone has there opinion, but I feel like in Cali and Texas there are so many things to do that cost little to no money, but here, the options are limited and things can get expensive quick - For example, California has nice weather all year round so you can enjoy parks, trails, beaches, etc. In the summer here, you are going to be doing things indoors. Things like bars, clubs, restaurants, etc. are not cheap.
If the $2,000 is what you will have leftover after paying for your apartment, utilities, food, car, insurance, etc. then you will do well and be able to save a lot. 



sidirsi said:


> Thanks for the replies. For what it's worth I'm single and somewhat frugal but I want to save money. About the taxes, my understanding is that I'd have to live in the UAE for 330 days before that tax break applies to me, right? I appreciate the help, and I apologize if this has been gone over before. I'm not great with taxes as it is, and I don't want to take the job and come home to some huge IRS headache.


Again, you are referring to the Foreign Income Exclusion and there are tests to make sure you qualify for it. Here is a LINK to some questions you might get the answers to. 
The main test is the Bona Fide Residence Test, usually, this means that you have to have lived *outside *the US for 330 days. But do note that this can be prorated for tax reporting purposes and also that just because you lived outside the US for this long doesn't mean you will meet the requirement. 

Anyway, good luck and welcome to the forums.


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## Bevdeforges (Nov 16, 2007)

On the tax side of things, let me invite you over to the Expat Tax section here in the forum: Expat Tax - Expat Forum For People Moving Overseas And Living Abroad

There are a number of threads on topics related to the US obligation to file taxes no matter where you are resident. And, you can always consulate Publication 54 on the IRS website, which is for Overseas Taxpayers. It explains the Foreign Earned Income Exclusion, including the Bona Fide Resident and Physical Presence tests and how they work.
Cheers,
Bev


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## sidirsi (Jan 25, 2014)

Thanks everyone, these have all been very helpful and informative replies.


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## TallyHo (Aug 21, 2011)

I won't address the tax issue as it's been covered by others.

But the answer to your last question is probably no.

If you had housing + utilities + car provided, then you can survive off $2,000 a month. 

But if you need to cover all expenses then the answer is no, not if you want to maintain a western lifestyle. A decent flat or villa share (cheapest option for westerners) will cost you between $1,000 to $1,500 a month. Food + transportation adds up. It's unlikely you will be happy in Dubai on such a low income.

Note that as a comparison expat teachers at international schools usually make around 15K AED/month (~$4,000 USD) with free housing + utilities provided. 



sidirsi said:


> I'm considering taking a teaching position in Dubai. The company offering me the position is telling me that my income would be completely tax-free, which sounds a bit dodgy to me. If I am an American I still have to pay taxes, right?
> 
> Also is (don't laugh) $2000 a month enough to live on in Dubai?


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## sidirsi (Jan 25, 2014)

Thanks TallyHo, that's helpful information. Housing would be provided under my contract, but not a car or utilities. I'm imagining that even so, it would be difficult to save much money. My problem is I am a Master's graduate with no teaching experience, so this one company, Sabis, is the only real option I've found. I think though, given the financial advice I've gotten from you and others, that it may be a better idea to pick up some teaching experience stateside and then try for a new contract in a year or two.


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