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Tilted Cat Head
Administrator
Location: Manhattan, NY
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Quote:
2007 Foreign Earned Income Exclusion Rises to $85,700
The foreign earned income exclusion for 2007 has been increased to $85,700. That is the good news. Under the new law came into effect in 2006, all of your foreign earned income above the exclusion will be taxed at the effective rate for that level of income as though the excluded amount had also been taxed. That means for each additional dollar above the exclusion the Federal tax rate will be at least 28% or more, though may be offset if you pay any foreign taxes by the foreign tax credit. One solution is to open an IRA by 4/15 if you earned more than the exclusion and deduct as much as the IRA will permit based on your age. Remember you can only open an IRA if you foreign earned income exclusion and foreign housing exclusion or deduction taken together are less than your total foreign earned income (from wages or self employment income) and the amount contributed to the IRA does not exceed the difference.
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http://www.usexpatriate.blogspot.com/
You should only be taxed on the amount above $85,700.
I'd ask any of the expats that you know there if they have any accountants that do US expat taxes. There may be other exclusions for your housing and for your travel that you may be able to deduct.
Quote:
IRS BOOTS 2007 HOUSING COST ALLOWANCES FOR THOSE WORKING ABORAD IN HIGH COST AREAS
Notice 2007-77, 2007-40 IRB
A new Notice effectively increases the maximum housing cost exclusion for U.S. citizens and residents working abroad in specified high-cost locations. The increases are made based on geographic differences in foreign housing costs relative to U.S. housing costs.
Background. A qualified individual may elect to exclude from U.S. gross income his foreign earned income and housing cost amount. (Code Sec. 911(a)) Under Code Sec. 911(c)(1), the maximum excludable housing cost amount is calculated by way of a complex formula.
The excludable housing cost amount is the excess, if any, of (1) the individual's allowable housing expenses for the year (i.e., the housing expense limitation) over (2) a base amount. For 2007, a taxpayer's allowable housing expenses, assuming he is eligible for entire year, generally can't exceed $25,710; subtracting the base amount of $13,712 yields a generally applicable maximum housing amount exclusion of $11,998.
IRS may issue regs or other guidance providing for the adjustment of the maximum allowable housing expense limitation on the basis of geographic differences in housing costs relative to housing costs in the U.S. (Code Sec. 911(c)(2)(B))
Increases for high-cost areas. Notice 2007-77 makes adjustments for housing costs during 2007 in high-cost foreign areas. Specifically, it contains a table that (1) identifies locations within countries with high housing costs relative to U.S. housing costs, and (2) provides an adjusted annual maximum and daily housing expense limitation for a qualified individual incurring housing expenses in one or more specified high cost localities in 2007 to use (instead of the otherwise applicable annual housing expense limitation of $25,710, or the prorated daily amount) in determining his housing expenses. A qualified individual incurring housing expenses in one or more of the high cost localities identified in the table for the year 2007 may use the adjusted limit provided in the table (in lieu of $25,710 or the prorated daily amount) in determining his housing cost amount on Form 2555, Foreign Earned Income.
Example: A U.S. taxpayer is posted to Paris, France, for all of 2007. His maximum housing cost exclusion is $73,488 ($87,200 full year limit on housing expense in Paris − $13,712 base amount).
Many, but not all, of the maximum housing expense limitations for specified high cost localities are higher for 2007 than they were for 2006. For example, for 2007 the maximum housing expense limitation for Toronto, Canada, is $46,000; it was $41,500 for 2006. On the other hand, for Vienna, Austria, the maximum housing expense limitation remains unchanged at $28,824.
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