Americans living abroad may be eligible for several important deductions and exclusions that help reduce or eliminate their expat income tax liability. In today’s video blog, David McKeegan, Co-Founder of Greenback Expat Tax Services, answers an expat’s question about their tax liability if their income falls below the threshold for the Foreign Earned Income Exclusion (FEIE).
Hi everybody. I’m David McKeegan with Greenback Expat Tax Services.
Our question this week is: “I started my first job last month and I’m substantially below the Foreign Earned Income Exclusion. Does that mean that I will not be accountable for any taxes whatsoever? I work in the UAE.”
Basically, the way this works is, if you’re earning under the Foreign Earned Income Exclusion and you’re not self-employed, then in this case you probably won’t owe any expat income tax in the US.
If you are self-employed, which will include a contractor, you will owe self-employment tax in the US. This will change from country to country, but for the UAE, you will owe self-employment in the US.
The other thing to note is that even if you don’t think you’re going to owe any taxes, you still have the filing requirement. This is one of those weird IRS things. The way it works is that you need to file in order to receive the Foreign Earned Income Exclusion, which includes your income and makes it so that you don’t owe any taxes.
In answering your question, yes, it’s unlikely that you owe any tax in the US if you’re working in the UAE and you’re not self-employed and you’re earning under the Foreign Earned Income Exclusion amount. But you will still need to file in order to get the exclusion that means that you don’t owe any taxes.
Hope that helps. If you have any questions, please feel free to send them in to us. Thank you very much.
Still Have Questions About Your Expat Income Tax?
For additional information on expat tax deductions and exclusions, visit our blog, which is chock full of helpful articles. If you would like us to prepare you expat income tax return, contact our expert CPA’s and IRS Enrolled Agents today!