Us Expats: Tax Exemption Question

[sergio]

US citizens working abroad are allowed a generous US income tax exemption if they remain out of the US for all but thrity-five days a year. Do expats who read this forum observe this or stay longer in the US than thirty-five days? Does anyone know if this is really enforced? Not much time if you have elderly parents or emergencies.

 

[che]

You need an accountant. I think 31 days out of country satisfies physical presence test. If you stay over it is subjective. That's why you need an accountant. If your taxes are simple... relative terms... an accountant will charge around $300 to file your return. If you need a referral message me.

 

[che]

BTW, exemption is on Federal income tax only. You still pay medicare, medicaid and social security taxes which amount ti around a cool 15%. Although it seems some here do not consider these taxes.... they are. And you have to pay regardless of whether you qualify for federal tax exemption on first $100.K.

 

[Jaredberryman]

You can also qualify for the exemption if you have bona fide residence. This means in the event that you are audited, you must prove that you are a resident of Argentina for the entire tax year. In that case, it would likely mean that you need a DNI or some other such official document to prove it. The actual term is called "bona-fide residence" and you can google it and see if you would be eligible. There is no rule, apparently, for what that might mean. However, I'm pretty sure a DNI and a majority of your physical presence here in Argentina would suffice to prove you are a resident here.

 

[jeff1234]

I've been living in BsAs for over a year. I'm hoping to sell property in New York State soon.
Does anyone know if my expat status can help me reduce my Federal Cap Gains tax?

 

[che]

With regard to cap gains and earned income exclusion, I do not think you are exempt. The foreign earned income exemption is only for earned income (I.E. Wages) and only applies to federal taxes. Social security. medicare, medicaid, and capital gains tax, as well as state taxes if your state doesn't exempt you are not included in federal exemption...

http://www.irs.gov/publications/p519/ch09.html

In addition, now that we have reached 2013, with regard to rela estate capital gains, I believe if gain on sale of your house for $250K+ single, $500K+ married, there is an additional 3.8% obama care tax for medicare. Not sure where syngirl will throw that one. Not even sure if she considers medicare, ssn, and medicaid taxes or benefitts hahaha... If the cap gain is below no tax for obama care medicare.

 

[sergio]

I have an accountant. I was wondering if expats here exceed the number of days allowed, I thought 35, allowed in the US and if this rule is really adhered to?

 

[citygirl]

Sergio - a few years ago I exceeded the 35 days as I was traveling to the US quite frequently for work. However, since I met the bonafide residence test, there was no issue. IIRC (my accountant did the paperwork), I and the company had to pay the mandatory payroll taxes on the # of excess days that I was in the US as those days counted as US based income instead of being excluded through foreign earned income exemption . Anyway, it was no big deal at all. Your accountant should be able to advise you of the details.

Technically if you are using the physical presence test as a basis to exculde the income and you exceed the stay, then you would have an issue.

 

[sergio]

Citygirl, how did the US tax authorities know that you had exceeded 35 days? Also i thought that in such a case you lose the whole exemption and not just a prorated part.

 

[citygirl]

You have to file a form that lists your dates of travel when you claim the foreign income inclusion . Def don't lose the exemption and the tax I paid was minimal. But again, bonafide resident test which is a lot more difficult. If you are using the easier physical presence test, you would lose the exemptions. No exceptions. .