Hi and welcome to our site!Assuming - you are an US citizen - you are required to report all your worldwide income.In additional - you might be able to claim a foreign earned income exclusion.
To to claim foreign earned income exclusion - the taxpayer should file either form 2555 or 2555EZ. Here are forms: Form 2555 Instruction 2555
Please be aware that - the exclusion above will not affect self-employment taxes - only income taxes. Only earned income is excludable - income from wages and self-employment. For instance - dividends, investment income, rental income, pensions, etc - are not excludable. Please also be aware that this credit is not granted automatically - you need to file a tax return and claim the credit. If the person bona fide resident of a foreign country - he/she may qualify for the foreign earned income and foreign housing exclusions.For the person to qualify for the foreign earned income exclusion - he/she should: -- Work and reside outside the United States for at least 330 days during the year(Physical Presence test), or -- Meet either the Bona Fide test.
In additional to the foreign earned income exclusion - you may claim a foreign hoising exclusion.The amount of qualified housing expenses eligible for the housing exclusion and housing deduction is limited. The limit is generally 30% of the maximum foreign earned income exclusion (computed on a daily basis), multiplied by the number of days in your qualifying period that fall within your tax year. For 2012, this is generally $77.95 per day ($28,530 per year). However, the limit will vary depending upon the location of your foreign tax home. The limits for high-cost localities are listed in the Instructions for Form 2555 - see page 6 - http://www.irs.gov/pub/irs-pdf/i2555.pdf
Ok, Not sure if you know? will I have to pay foreign Swiss taxes as well to my US responsibilities? Is there a 95k credit towards my income and then I pay taxes on income above 95k
Opps, just glanced at the 2555, i see the exclusion for 95k..
The issue that claiming a foreign earned income exclusion is your choice - you are not required to do so. Instead - you may clain a foreign tax credit.If the same income is taxable abroad and in the US - you may claim a credit for taxes paid abroad - so the same income would not be taxed twice. Use the form 1116 -http://www.irs.gov/pub/irs-pdf/f1116.pdf please find instructions here - http://www.irs.gov/pub/irs-pdf/f1116.pdfThe credit is limited by the US tax liability on the same income - the form 1116 is used to calculate the amount of credit. Means - if tax liability abroad is higher - there will not be US taxes on that income, but if tax liability abroad is lower - in the US you will pay the difference after the credit will be applied.
You may claim both - a foreign earned income exclusion and a foreign tax credit - but not on the same income. For instance - if your income is above the foreign earned income exclusion limit - you may claim a foreign earned income exclusion up to the limit - and a foreign tax credit for the amount above.
Thanks for your help, you were helpful. Excellent service! I joined the trial period if any question come up I'll "Just Ask.."
I am glad to be helpful.In case taxes in Switzerland are higher - it might be better not to claim a foreign earned income exclusion and only claim a foreign tax credit. In any case - there will not be double taxation of the same income.However - to be precised - I might suggest to prepare your tax return both ways and compare.
Thanks again, We'll compare both ways when the time comes.
You are very welcome. Let me know if you need any clarification.
Is there any other links you can send me for filling foreign taxes, deductions ?
Yes - please stay with me while I am looking for references...
The starting point would be this publication Publication 54, Tax Guide for US Citizens and Resident Aliens Abroad www.irs.gov/pub/irs-pdf/p54.pdfYou may review online - or may order a hard copy from the IRS.