How much US tax do I have to pay working for a foreign company as a US citizen?

Question

I am aware that I have to pay US income tax if my income exceeds certain amount even if I work for a foreign company in a foreign country and pay tax and social security of this country

My question is how much do I have to pay US tax after I already paid high income tax and social security in this foreign country. For example, if I would earn 100,000Euro/year in Germany, I am married with no kids and spouse has no job. How does US tax law apply to this situation? Based on what amount do I have to pay US tax? What kind of expenses could be written off for US tax?

Answer 1

US citizens must pay US taxes no matter where they live or work--period. In fact, in some cases, even if you give up your citizenship, the IRS will still come after you for taxes.

If you live overseas for more than 12 months, you become eligible for the overseas American tax credit (which is about $86,000). There is also a credit for housing allowances should you be getting one of those. The IRS booklet can help explain how to claim this. I should note that recent changes have affected this deduction (i.e. the tax rate on that above $86k is higher than it used to be).

Now, a lot of people say "heck, I'm making $85,000 so I'm just not going to file at all". This is asking for trouble. It is better to go ahead and file and prove that you have no income tax due rather than to just say 'I don't owe anything because I'm under the limit" and have them come after you.

Note: Some states do not give you an overseas tax credit for state income tax purposes, especially if you own property in that state.

Answer 2

You must file a return if your income exceeds the amounts in IRS Pub 501.

US Citizens are subject to US tax laws regardless of where they live. The IRS has offices in many foreign countries and will take enforcement action just as if you were at home in the States.

You MAY be eligible to claim an exclusion of foreign earned income (Form 2555) if you file by the filing deadline, including any extensions. Alternatively you can claim a credit of foreign income taxes paid. You should figure your taxes both ways and file whichever way is most beneficial to your.

Your filing status will depend upon your spouse's citizenship and other factors.

There's no way to tell what your tax situation will be with the minimal information provided.

All the information you need is available for free on the IRS website. Alternatively there are tax professionals in many foreign countries who specialize in US taxes for US ex-pats. Any US Embassy or Consulate can give you a list of local professionals who have registered with them. Many of them also advertise in the US ex-pat press.

Answer 3

What Dallas answered is not exactly true! If your income is over $86,000 oversea, not only you have to file US income tax, but also you have to pay US income tax as well. You might get tax credit after paying foreign tax, but how much you need to pay, I am not quite sure. You need talk to a tax expert unless somebody here knows the tax treaty between US and Germany.

Answer 4

Definitely file your US taxes. However, we have a mutual tax agreement with other countries. This means you will get credit for foreign taxes paid (and vice-versa) - and it comes off the bottom line of taxes owed (yeah!). Search IRS site for "credit for foreign taxes". You will have to file a 1040 - not a simpler form. Assuming you pay higher taxes abroad, you will probably not owe anything. But not filing... you are asking for trouble.

Answer 5

if you are working out of the us you do not to to pay tax but you have to file to proof you got some income and to prove you failed evry year but dont woory if you work out of the usa you are not gana pay tax but you have to file