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If I am a US citizen. A private consultant. I work and of course

live part time in Saudi...
If I am a US citizen. A private consultant. I work and of course live part time in Saudi Arabia. Is there a monetary threshold I must reach before having to pay US income tax? California state tax?
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Answered in 9 minutes by:
6/27/2013
Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 13,265
Experience: Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
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NPVAdvisor :

Hi,

NPVAdvisor :

... still don't see you coming into the chat here, so let me answer generally ...

NPVAdvisor :

Next, your needing to pay tax as a US citizen, starts with whether your income is above the standard (or itemized, If greater) deduction plus your personal (and any dependency) exemptions. ... And those numbers depend on whether you are married or single.

NPVAdvisor :

So, for example, the personal exemption is, for 2013: $3,900

NPVAdvisor :

And the standard deduction is 6100 for a single filer, and the 12,200 for those married filing jointly

NPVAdvisor :

SO depending on how you file, your threshold for owing tax would be 10,000 if you were single ... and goes up from there, if for example you are married filing jointly .... it would be 3900 for you 3900 for a spouse PLUS 12200 (20,000) before you'd have taxable income

NPVAdvisor :

Now, there is a Foreign earned income exclusion available on that return ... let me get you this years' number and requirements

NPVAdvisor :

See this, from H&R Block:

NPVAdvisor :

U.S. resident aliens living in a foreign country are subject to the same U.S. tax laws as those living in the United States. However, if you lived and worked abroad for most of the year, you might qualify for the foreign earned income exclusion. If you qualify, you can exclude up to $95,100 in income earned in 2012 while working abroad.


To qualify, you must have foreign-source earned income. All of these must apply:



  • This earned income includes compensation like:

    • Salaries

    • Wages

    • Commissions

    • Professional fees



NPVAdvisor :

AAlso,

NPVAdvisor :


  • You earned your income while performing services in a foreign country.

  • You satisfy the bona fide resident or physical presence test.

NPVAdvisor :

now... those tests:

NPVAdvisor :

To be considered a bona fide resident, you must:



  • Live in foreign country for the entire tax year without interruption

  • Not have made a statement to the foreign government denying residence status

  • Intend to make a home in the foreign country for an indefinite period of time. You must apply a facts-and-circumstances test to determine where you intend to make your home.

NPVAdvisor :

To pass the physical presence test, you must be present in a foreign country for at least 330 full days within a consecutive 12-month period.

NPVAdvisor :

And that's an either/OR on those two (either one will satisfy the requirement for the exclusion) ... and finally ...

NPVAdvisor :


  • You satisfy the tax-home test. Your tax home must be in a foreign country throughout your period of bona fide residence or throughout your physical presence.

NPVAdvisor :

The Foreign Earned Income Exclusion 2013 amount is $97,600, up from $95,100 in 2012.

NPVAdvisor :

The Foreign Earned Income Exclusion 2013 amount is $97,600, up from $95,100 in 2012.

NPVAdvisor :

looks like you're typing, so I'll wait

NPVAdvisor :

In the mean time here's an excellent article on international taxation for Americans. http://premieroffshore.com/foreign-earned-income-exclusion-2013/

NPVAdvisor :

... still don't see ya coming into the chat, so I'll move us to the "Question and Answer" mode ... Maybe that will help ... (We can still continue a dialogue there, just not in real-time as we can here)

NPVAdvisor :

Hope this has helped

NPVAdvisor :

Let me know if you have questions ...

NPVAdvisor :

Lane

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Customer reply replied 4 years ago

I need clarification on time in country. I will spend 60-120 days in Saudi.I will definitely earn more than 95K off shore. Will this qualify me for the earned income tax credit?

Hi,

... just checking back in, as I never saw you come into the chat.

By the way, California does not have a foreign earned income exclusion.

Also, According to the California Franchise Tax Board, you are considered a resident of California if you are present in California other than for a temporary or transitory purpose, or if you are domiciled in California but you are outside California for a temporary or transitory purpose.

California is very aggressive in this regard.

(Please don't shoot the messenger) :)



And finally, if you have to pay taxes to a foreign government there IS a credit for that against your US taxes:

The foreign tax credit is intended to reduce the double tax burden that would otherwise arise when foreign source income is taxed by both the United States and the foreign country from which the income is derived.

Four tests must be met for the tax to qualify for the credit:

The tax must be a legal and actual foreign tax liability
The tax must be imposed on you
You must have paid or accrued the tax, and
The tax must be an income tax (or a tax in lieu of an income tax)


Hopefully, I've covered everything.

Hope this helps

Lane


If this HAS helped, I would appreciate a feedback rating of 3 (OK) or better … That's the only way they will pay us here.

HOWEVER, if you need more on this, PLEASE COME BACK here, so you won't be charged for another question.
Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 13,265
Experience: Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
Verified
Lane and 87 other Tax Specialists are ready to help you
Ask your own question now

Sorry ... looks like our posts "crossed in the mail."

It doesn't appear from what you've provided, that you will satisfy either the benefited resident test:

Live in foreign country for the entire tax year without interruption


Or the Physical presence test:

To pass the physical presence test, you must be present in a foreign country for at least 330 full days within a consecutive 12-month period.


Ask Your Own Tax Question


Thanks so much, for the rating.

Let me know if I can be of further help.

If you'd like to work with ME again just say "FOR LANE ONLY," at the beginning of your next question.


Thanks again,
Lane
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Lane
Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
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