My husband works overseas making nontaxable income. will he have to pay taxes if he comes home after 6 months?

Question

He has been there since November 2005. He will continue to work there till July 2007. I know he won't have taxes for the 2006 calender year, but since he is coming home 6 months into 2007, will he have to pay taxes on his overseas income for 2007 since he isn't completing that calender year? Thanks for any help!

my husband is working for a company contracted with the military, and we are both american. when he comes home, he will have been gone for 1 year and a half...

Answer 1

He is claiming the foreign earned income exclusion. In order to do so, he must either (i) be a bona fide resident of a foreign country for an uninterrupted period that includes a full taxable year, or (ii) be physically outside the United States for 330 full days during a period of 12 consecutive months. I assume he is using the 330 day test.

The 12 months do not have to be a calendar year, it could be November 2005 to October 2006, for example. He can have multiple 12 month periods that overlap; for example 11/05-10/06 and 7/06-6/07. The 12 month period can start and end on any day of the month, also.

If he goes to a foreign country in November 2005 and stays there until July 2007 he should qualify for the exclusion for the entire period.

However, the $80,000 annual exclusion is prorated for periods of less than a calendar year. For example, if he was in a foreign country for 45 days in 2005 he can exclude 45/365 x 80,000 for 2005.

He can never exclude more than $80,000 per year, plus certain housing amounts.

There are many factual details that need to be considered in order to nail down his entitlement to the exclusion. The IRS has some picky rules about what constitutes presence in a foreign country, so you need to consult an expert. His employer may provide an expert consultant, or may be able to point him to one.

More information is available at the link below.

Answer 2

That is pretty much what happened to me when I retired, except that I didn't get 6 weeks off but the rest of my life. I invested the money and put my feet up. And I travel overseas for a nice long holiday every 2 years. Just got back from China last month. Life is good,and it was all though my own hard work.

Answer 3

I am not quite sure what kind of nontaxable income he is making. Is he in the military? Are you both American?

If he is not in the military and he is American, you may want to make VERY sure that he doesn't owe taxes on the income he has been making. Most income made by Americans, even if overseas, is taxable.

Answer 4

Yes. He has to be overseas for 330 days to quailify for the tax free income exclusion... Please refer to Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad www.irs.gov


If you are a U.S. citizen or a resident alien of the United States and you live abroad, you are taxed on your worldwide income. However, you may qualify to exclude from income up to $80,000 of your foreign earnings. In addition, you can exclude or deduct certain foreign housing amounts.

You must be either:

A U.S. citizen who is a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax year,

A U.S. resident alien who is a citizen or national of a country with which the United States has an income tax treaty in effect and who is a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax year, or

A U.S. citizen or a U.S. resident alien who is physically present in a foreign country or countries for at least 330 full days during any period of 12 consecutive months.

Answer 5

He is entitled to an exemption of $80,000 for an entire year away. For 2006, the first $80,000 would be exempt from US income tax. For 2007, he would probably get an exemption for 1/2 of the $80,000 (6 months out of the period he was eligible for the exclusion, and the exclusion is $80k for the entire year).

He gets the exemption because of the continuity of being away for more than 330 days out of 365. It does NOT have to be 330 days of THAT year.

Answer 6

It depends! The IRS has clear and specific rules for this, which is something you don't find too often. For starters, only the first $80,000 is exempt. This exemption is dependent on one of two things; a foreign residency (you don't have to sell your house to get that) or the physical presence test (in the US for 30 or less days/year). If he has a residence overseas, he can pro-rate the deduction in '07. If he's relying on the physical presence test, he's out of luck.

Answer 7

i pretty sure he will. i thought about goin to work for a contractor in Iraq as a diesel mecheanic cuz its good money till i found out you have to be out of the country 335 days of the year for it to be tax free. kinda bogus if u ask me

Answer 8

taxable