Really Simple Question - Do PAYE Regular US/UK taxpayers owe anything to the US

Hi, my friend and I were having an argument on this one. If we take a dual US/UK citizen on the PAYE system and they earn £100k per year. Assuming the £100k salary is their only income, when declaring their tax to the US, will they owe any taxes to the US?

My thought was that as long as they pay more in taxes to the UK government than they would have to the US government, they're covered by the tax treaty and when they file the amount owed would be zero.

My friends thought is that any income earned over the $91,400 is taxed at the US rate regardless of any other taxes paid on it (effectively a double tax).

Anyone who has some wise words and links to settle the argument is much appreciated, the US tax embassy seems to constantly be engaged and they don't allow for people to wait for the next assistant which makes it almost impossible to call in. I've also tried searching the web but surprisingly I can't find a clear answer to this question.

Kind Regards

It's not a yes or no question, but usually, the taxpayer would not pay taxes even though they've made more than the exclusion limit. It depends on other liabilities, how much over the limit they've made, etc.

The OP is right. His/Her friend is wrong. The correct answer to the OP's question is "no".

The explanation is as follows: there are two options available for the US expat to reduce or avoid US tax. One is the Foreign Earned Income Exclusion. The other is the Foreign Tax Credit. Whilst you could technically use both, you can't use both for the same income.

Whilst the FEI is limited to $91,500, the FTC is unlimited. So as long ad you are paying more in the UK, the FTC will knock out US tax, since UK tax is higher than US tax.

The FEI is only really helpful in countries with no tax or lower rates than the US.  The only reason why a UK resident would want to use the FEI is for example a non-Dom claiming the remittance basis with non UK and non US earned income, or someone over 75 (with a corresponding enhanced UK personal allowance), no dependants, and filing as single, and with a little employment income (say £10,000) where the UK tax doesn't cover the US tax. It won't help for non earned income such as pension or investment income, so some pensioners may end up paying US tax on their pensions.

The above answer assumes there are no other income sources, even those which are in a tax free wrapper in the UK (such as ISAs and SIPPs)

With regards

Andrew

The above answer assumes there are no other income sources, even those which are in a tax free wrapper in the UK (such as ISAs and SIPPs).

I don't think you disagreed with me in the end.

@Geeta. What I meant was that the OP stated in the question that there were no other income sources other than the PAYE income.  So the answer IS clear cut that there will not be any US tax in this case.

However, you are right. We are not disagreeing, just I was bring pedantic. I will edit my other post.

You guys rock, thanks so much for your time and input!!

Thanks!