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I have an international tax question: I my father in law

Customer Question
I have an international tax...
I have an international tax question:
I my father in law lives in Israel half the year and lives in Australia the other half, would he be exempt from taxation of social security benefits for either 1/2 the year, full year, or no tax break at all.
Submitted: 12 months ago.Category: Tax
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Answered in 28 minutes by:
11/21/2016
Tax Professional: Lane, JD, CFP, MBA, CRPS replied 12 months ago
Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 12,864
Experience: Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
Verified

Hi. Is your father a US Citizen? Let me know and we can go from there

...

Lane

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Customer reply replied 12 months ago
my father-in-law is a U.S. citizen living 50% in Israel and 50% in Australia. He was born in the U.S. and left after retiring from his job.
Tax Professional: Lane, JD, CFP, MBA, CRPS replied 12 months ago

I'm so sorry be the messenger here, but all US tax residents (citizens, green card holders, and even those in the US long enough to pass the substantial presence test) must report and pay tax on all worldwide income.

...

However, no more than 85% of social security benefits is ever taxable, and depending on that and his other income maybe less, maybe none at all.

...

If you:

...

  • file a federal tax return as an "individual" and your combined income* is
    • between $25,000 and $34,000, you may have to pay income tax on up to 50 percent of your benefits.
    • more than $34,000, up to 85 percent of your benefits may be taxable.

...

  • file a joint return, and you and your spouse have a combined income* that is
    • between $32,000 and $44,000, you may have to pay income tax on up to 50 percent of your benefits
    • more than $44,000, up to 85 percent of your benefits may be taxable.

...

*Note:

Your adjusted gross income
+ Nontaxable interest
+ ½ of your Social Security benefits
= Your "combined income"

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Tax Professional: Lane, JD, CFP, MBA, CRPS replied 12 months ago

So if social security is his ONLY income it's VERY possible that it's not taxed ... Also, if he has to pay taxes TO those countries, he can use the Foreign Tax Credit to mitigate the double taxation on the return

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Customer reply replied 12 months ago
Your responses do not directly answer my question. There is a treaty between Israel and the U.S. if you are a U.S. citizen living in Israel. If living in Israel, S.S. benefits are not taxed by the U.S. My question has to do with residency and the portion of S.S. benefits that my father-in-law can exclude from his U.S. Tax return.
Tax Professional: Lane, JD, CFP, MBA, CRPS replied 12 months ago

Let me look at the US.Israel totalization agreement ... I'm interest in understanding why you didn't state that

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Customer reply replied 12 months ago
In addition, he has a pension from G.E., and receives IRA distributions every year.
Tax Professional: Lane, JD, CFP, MBA, CRPS replied 12 months ago

And that would be fodder of the tax treaty ... you'll have to give me some time

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Tax Professional: Lane, JD, CFP, MBA, CRPS replied 12 months ago

Tell you what ... I'll just opt out here... this is an under-priced question AND not asked in good faith ... maybe someone else will help you here

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Customer reply replied 12 months ago
Does 50% staying in Israel qualify him as an Israeli citizen and therefore can exclude all of his S.S. benefits from from the 1040.
Tax Professional: Lane, JD, CFP, MBA, CRPS replied 12 months ago

As a show of good faith on MY part, here are the section myou or someone else will need to read

...

Article 20-------------------------------Private Pensions and Annuities

Article 21-------------------------------Social Security Payments

...

You'll also want to look for any US saving clause

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Tax Professional: Lane, JD, CFP, MBA, CRPS replied 12 months ago

And article 3 ------------------------Fiscal Residence

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Tax Professional: Lane, JD, CFP, MBA, CRPS replied 12 months ago

Where by reason of the provisions of paragraph (1) an individual is a resident of both Contracting States: (a) He shall he deemed to be a resident of that Contracting State in which he maintains his permanent home. If he has a permanent home in both Contracting States or in neither of the Contracting States, he shall be deemed to be a resident of that Contracting State with which his personal and economic relations are closest (center of vital interests). In the case of a person who is an "oleh" (as defined in section 9(16) of the Israeli Income Tax Ordinance), his center of vital interests shall be deemed to be in Israel. (b) If the Contracting State in which he has his center of vital interests cannot be determined, he shall be deemed to be a resident of that Contracting State in which he has a habitual abode; (c) If he has a habitual abode in both Contracting States or in neither of the Contracting States, he shall be deemed to be a resident of the Contracting State of which he is a citizen; and (d) If he is a citizen of both Contracting States or of neither Contracting State, the competent authorities of the Contracting States shall settle the question by mutual agreement.

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Tax Professional: Lane, JD, CFP, MBA, CRPS replied 12 months ago

Again, far under-priced, and as you can see would need MUCH more information... something as simple as "half the time spent" won't do it

...

Issues of abode, domicile, and center of vital interests arise here .. just to begin

...

My first answer dealt with the portion of Social Security that is taxable (a first things first issue , regardless of the tax treaty issues)

...

I'd be glad to offer at a more reasonable price, but the time spent to obtain the information needed, and do the analysis here would likely take a couple hours.

...

my minimum in $300

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Lane
Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 12,864
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Experience: Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986

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