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My client is a US citizen living in Germany. He qualifies

 
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My client is a US citizen living in Germany. He qualifies for foreign earned income exclusion, however is there anything to exclude his foreign income from US self employment tax?

 



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Searched German US tax treaty

Submitted: 275 days and 2 hours ago.
Category: Tax
Value: 38 €
Status: CLOSED
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Expert:  Fran-mod replied 274 days and 20 hours ago.

Hi, I’m a moderator for this topic and I wonder whether you’re still waiting for an answer. If you are, please let me know and I will do my best to find a professional to assist you right away. If not, feel free to let me know and I will cancel this question for you. Thank you!

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Expert:  USTaxAdvising replied 273 days and 13 hours ago.

Hello,

 

Unfortunately the foreign earned income exclusion does not shield the self employment income from Self Employment Tax. This hardly seems fair but this is the rule.

 

Per the IRS Article - Foreign Earned Income Exclusion (http://www.irs.gov/businesses/article/0,,id=182017,00.html)

"Self-employment income: A qualifying individual may claim the foreign earned income exclusion on foreign earned self-employment income. The excluded amount will reduce the individual's regular Income Tax, but will not reduce the individual's self-employment tax."

 

 

Note that if the client had self employed health insurance then this would assist to reduce the self employment taxes. (http://www.irs.gov/newsroom/article/0,,id=233824,00.html

)

Please let me know if you have any further questions on this.

 

Best regards,

Expert TypeCPA
Category: Tax
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Answered: 7/12/2012

Experience: US Taxation specialist.

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Customer replied 273 days and 1 hours ago.

the ability to use se health ins to reduce se tax was only available for the 2010 Tax Year.


Thank you for confirming the answer that I was fairly certain of.

Expert:  USTaxAdvising replied 272 days and 23 hours ago.

Yes, that's right about the health insurance only being a 2010 self employment tax break. (it does not apply for 2011) I suppose.

 

Anyhow please accept or provide a rating so that I can get credit for my time.

 

Additionally, let me know if you have any further questions.

 

Best regards,

 
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