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-   -   FAQ: Expat's Guide to US Tax (https://www.englishforum.ch/finance-banking-taxation/106934-faq-expat-s-guide-us-tax.html)

kiwiguy08 20.01.2012 07:52

Re: FAQ: Expat's Guide to US Tax
 
Quote:

Originally Posted by Joy2 (Post 1355386)

  • Your tax shelters are limited -- if you use the Swiss pension scheme ("pillars 2 and 3") to reduce your CH taxes, as the Swiss do, the US will tax the money you put in -- and then the Swiss will tax it when you take it out, resulting in double taxation of those CHF's. People in the financial world may have finagled some other way to shelter money (non-qualified deferred compensation plan in the States? I think there are some fancy and advantageous expat contracts out there, but we are local).

Can you please explain how this works. My gross Swiss income is slightly under the FEIE limit. (not taking into account taxes, housing exemptions)

Say for example i earn 50,000 gross, I pay my contributions to AHV, PK, and the employer gives a matching portion of that as well into the system. Does that mean that my actual income in the eyes of the US is 50K+ whatever my employer contributions are?

BrianJW 20.01.2012 09:59

Re: FAQ: Expat's Guide to US Tax
 
Quote:

Originally Posted by kiwiguy08 (Post 1463515)
Can you please explain how this works. My gross Swiss income is slightly under the FEIE limit. (not taking into account taxes, housing exemptions)

Say for example i earn 50,000 gross, I pay my contributions to AHV, PK, and the employer gives a matching portion of that as well into the system. Does that mean that my actual income in the eyes of the US is 50K+ whatever my employer contributions are?

If you earn chf 50k gross or even up to whatever 90k usd is in chf (depending on exchange rates) and you don't have major income from investments you will not owe the US govt anything. You still need to file a return but can download turbotax and it's easy step by step.

BrianJW 20.01.2012 10:14

Re: FAQ: Expat's Guide to US Tax
 
Quote:

Originally Posted by danb123 (Post 1356171)
Well in my case I have no 'extra' deductions and I've never been subject to US tax. Keep in mind the US tax is only on the amount above the exemption, not your entire income. Also we are only talking about US federal since you don't have to pay state tax (maybe some expats might who are on a short term work assignment though).

I calculate my tax rate every year as a 'flat tax' and my overall rate is about 10% less than what it was in the US.

Regards,
Dan

The rules vary on this state by state. You need to break residency. It's worth reading the state rules.

kiwiguy08 20.01.2012 10:57

Re: FAQ: Expat's Guide to US Tax
 
Quote:

Originally Posted by BrianJW (Post 1463601)
If you earn chf 50k gross or even up to whatever 90k usd is in chf (depending on exchange rates) and you don't have major income from investments you will not owe the US govt anything. You still need to file a return but can download turbotax and it's easy step by step.

So what happens if you are slightly under the tax threshold and your company's contribution to your AHV and Pensionskasse takes you over the threshold?

HollidayG 20.01.2012 11:03

Re: FAQ: Expat's Guide to US Tax
 
Quote:

Originally Posted by kiwiguy08 (Post 1463689)
So what happens if you are slightly under the tax threshold and your company's contribution to your AHV and Pensionskasse takes you over the threshold?

Technically, Pensionskasse counts as income and you should include
it on your return.

kiwiguy08 20.01.2012 11:16

Re: FAQ: Expat's Guide to US Tax
 
Quote:

Originally Posted by HollidayG (Post 1463700)
Technically, Pensionskasse counts as income and you should include
it on your return.

Thanks! The employers contribution to the AHV does not count as income then.

HollidayG 20.01.2012 13:16

Re: FAQ: Expat's Guide to US Tax
 
Quote:

Originally Posted by kiwiguy08 (Post 1463712)
Thanks! The employers contribution to the AHV does not count as income then.

To be honest, I am not sure, but I do not declare it personally.

There is an American CPA here that specializes in taxes.

Do you want her contact?

kiwiguy08 20.01.2012 13:20

Re: FAQ: Expat's Guide to US Tax
 
Sure, should be beneficial.

Guest 10.04.2012 08:38

Re: FAQ: Expat's Guide to US Tax
 
I have a question- as an American with 2 children (both are dual US/CH), can I claim the child credits for them or do we need to physically live stateside to claim it?

Kepete17 10.04.2012 12:15

Re: FAQ: Expat's Guide to US Tax
 
yes you can claim it.

Laura358 05.04.2013 00:01

Re: FAQ: Expat's Guide to US Tax
 
Thank you! The following link was really helpful!

Quote:

Originally Posted by Village Idiot (Post 1110174)
As US tax season is rapidly approaching, I thought I would take a few moments to share with others on EF the single-best resource on US taxes for expats that I've come across: The Expat's Guide to US Taxes


Dual US/Swiss Citizen 05.04.2013 10:00

Re: FAQ: Expat's Guide to US Tax
 
Are capital gains really 100% US tax liable?

I recently sold some stocks with a capital gain. My US tax preparer advised that I can't counter this with any Swiss tax credits since CH has no tax on capital gains. He says each category of income is separate. Could anyone confirm if this is correct?
This means that any gains in investment income would be 100% taxable in the US regardless whether one is below the FEIE.

Village Idiot 05.04.2013 16:04

Re: FAQ: Expat's Guide to US Tax
 
Quote:

Originally Posted by Dual US/Swiss Citizen (Post 1843957)
I recently sold some stocks with a capital gain. My US tax preparer advised that I can't counter this with any Swiss tax credits since CH has no tax on capital gains. He says each category of income is separate. Could anyone confirm if this is correct?

This means that any gains in investment income would be 100% taxable in the US regardless whether one is below the FEIE.

He is correct. You cannot combine categories of income. I have this issue each year because I have foreign tax credits that I carry forward each year. I can use these credits against my earned income, but not any other categories.

Also, dividends don't fall under the FEIE. The clue is in the second 'E' (FEIE), which stands for Foreign Earned Income Exclusion. Dividends are unearned income, not earned income.

UncleTell 05.04.2013 16:11

Re: FAQ: Expat's Guide to US Tax
 
Quote:

Originally Posted by Village Idiot (Post 1844286)
.....The clue is in the second 'E' (FEIE), which stands for Foreign Earned Income Exclusion. Dividends are unearned income, not earned income.

But what about the 350.-- CHF interest that my savings accounst bequested me with last year! I didn't "Earn" them either! :rolleyes:

runningdeer 07.04.2013 21:59

Re: FAQ: Expat's Guide to US Tax
 
Quote:

Originally Posted by UncleTell (Post 1844293)
But what about the 350.-- CHF interest that my savings accounst bequested me with last year! I didn't "Earn" them either! :rolleyes:

I am guessing it is not a serious question, clearly not earned.

That is why retiring abroad with a US tax obligation is near financial suicide, at least in a low income tax country like CH, no FEIE.

TuxedoPants 16.12.2013 11:38

Re: FAQ: Expat's Guide to US Tax
 
Sorry to drag up an old thread, but I could not find anywhere in the guide where it says Your first $91K earned abroad will not be taxed. Can anyone confirm this is true? Does this mean that I do not need to fill out tax forms until after I have earned 91,000?

Quote:

Originally Posted by Joy2 (Post 1355386)
Yes, worry. Whether the impact is material or not depends on how much money you will be earning. Read the guide mentioned above to get a general understanding. We haven't had to do a year of taxes yet, but this is what I've figured out by reading (lots of great info on this site if you dig around a little).

  • Your first $91K earned abroad will not be taxed and you can claim a credit for foreign taxes paid on the rest (i.e. you will not be taxed double).
  • Housing in Geneva is outrageously expensive, but you will get a housing deduction specific to Geneva that may or may not make it worth it.
  • If you end up owing the IRS, it tends to be the difference between what you paid the Swiss government and what you would have paid the US government if you had lived there (i.e. being in a "low tax" country doesn't help you).
  • Your tax shelters are limited -- if you use the Swiss pension scheme ("pillars 2 and 3") to reduce your CH taxes, as the Swiss do, the US will tax the money you put in -- and then the Swiss will tax it when you take it out, resulting in double taxation of those CHF's. People in the financial world may have finagled some other way to shelter money (non-qualified deferred compensation plan in the States? I think there are some fancy and advantageous expat contracts out there, but we are local).
  • You can still take the US deductions that you always have -- charity, mortgage, self-employment expenses, etc.
  • Our tax advisor thought that it would "come out in the wash" based on the information we gave him.
  • Your decision has to be based on a lot more than $$$ or you may be very unhappy.
  • Whatever you do, don't post on EF "Can I survive in Geneva on 120,000 CHF/year".


Village Idiot 16.12.2013 11:44

Re: FAQ: Expat's Guide to US Tax
 
Quote:

Originally Posted by TuxedoPants (Post 2044698)
Sorry to drag up an old thread, but I could not find anywhere in the guide where it says Your first $91K earned abroad will not be taxed. Can anyone confirm this is true? Does this mean that I do not need to fill out tax forms until after I have earned 91,000?

You are referring to the Foreign Earned Income Exclusion, which is $97,600 for 2013. You can exclude this income, but you still need to file a tax return.

http://www.irs.gov/Individuals/Inter...come-Exclusion

TuxedoPants 16.12.2013 12:08

Re: FAQ: Expat's Guide to US Tax
 
Thanks for the link!

So basically every year, I fill out a tax return but never owe US taxes because I earn under the FEIE?

Quote:

Originally Posted by Village Idiot (Post 2044702)
You are referring to the Foreign Earned Income Exclusion, which is $97,600 for 2013. You can exclude this income, but you still need to file a tax return.

http://www.irs.gov/Individuals/Inter...come-Exclusion


meloncollie 16.12.2013 12:42

Re: FAQ: Expat's Guide to US Tax
 
Quote:

Originally Posted by TuxedoPants (Post 2044714)
Thanks for the link!

So basically every year, I fill out a tax return but never owe US taxes because I earn under the FEIE?

That's the gist, but be aware that there might be some complications. For instance, time spent working in the US, such as business trips while resident abroad, could reduce the FEIE. Also be aware that investment income might be treated differently in CH and in the US.

OH, and whatever you do - don't forget your FBAR!

TuxedoPants 16.12.2013 12:46

Re: FAQ: Expat's Guide to US Tax
 
Thanks. Oh boy I don't even know what FBAR stands for. Commencing more google research.
Quote:

Originally Posted by meloncollie (Post 2044741)
That's the gist, but be aware that there might be some complications. For instance, time spent working in the US, such as business trips while resident abroad, could reduce the FEIE. Also be aware that investment income might be treated differently in CH and in the US.

OH, and whatever you do - don't forget your FBAR!



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