International Taxes for Dummies?

Hey All,

   I'm new to the site, so please forgive me if I raise questions that may be buried (or not so buried) on the site. My wife and I along with another family are considering moving abroad. The current thinking is  the UK. The two primary bread winners for the families will be applying as Skilled Immigrants and plan on moving ourselves irrespective of our employers (ie...if they pay for the move, taxes, etc Great! If not, c'est la vie.)

   My primary concern right now is taxation. From reading the IRS website   , it looks like each of the families can exclude a combined $160k USD, assuming all four are of us are working. Is that a correct assumption, for instance if I made $90k and my wife made $30k, can we exclude the full $120k or do I get hit with US taxes for my $10k above the $80k per person limit. Regardless of the level, when we meet the magic number to have to pay US taxes, do the taxes get calculated from the GROSS or NET?

  Can anyone refer me to an International Personal Taxation for Dummies site? I'm full of questions right now, which is good. However, I don't know, what I don't know and not asking the questions I don't know to ask as the ones that always come back to bite me.   

Thanks
Eric 

The quick and dirty answer is that each person pays some tax on the amount over $80K.  For the under $80K/per person amount, the IRS gives you an offsetting credit.  Basically, since you pay tax in another country, they are not making you be double taxed.  On the amount over $80K, you don't get the credit.  You can itemize, though, and are able to deduct your foreign tax.  So there is some potential tax relief, even over $80K. 

US taxes are always due on the gross amount of earnings.  So, you would pay the tax on the amount of gross earnings that was in excess of $80K. 

I believe the $80K is per person and not $160K spread anyway you like it, but I am really not positive.

As for the Internation Tax for Dummies, I would browse through the site.  It is giong to give you the best layperson term answers, in one place.

Greetings,

I may be moving to the UK in 2005 for my American Company.  Although I am not too worried about the tax issues, I am curious what the tax rates are.  I will make roughly 35,000 Pounds in direct salary.

Also, can the UK tax any cost of living adjustments, housing allowances, car allowances, etc?  They are technically Business Expenses and the money is not reported on my US W-2.

Cordially,

Christian

Greetings,

I may be moving to the UK in 2005 for my American Company.  Although I am not too worried about the tax issues, I am curious what the tax rates are.  I will make roughly 35,000 Pounds in direct salary.

Also, can the UK tax any cost of living adjustments, housing allowances, car allowances, etc?  They are technically Business Expenses and the money is not reported on my US W-2.

Cordially,

Christian

Income tax rates are 1960 GBP @ 10%, 28540 GBP @ 22%, 30500 GBP + @ 40%.  Most benefits are also taxed, which is different from the States.  In addition, you get National Insurance (instead of SS/FICA) removed from your paycheck.  Off the top of my head it is around 11%.

Back to benefits, there are some benefits that are worse tax-wise to receive than others.  What, specifically, do you anticipate receiving?

Hi guys

Just to clarify the matters, each person gets $80,000 of their foreign source earned income exclusded from taxation if their tax home is outside of the US. If you make $90,000, and your wife makes $30,000, you will get an exclusion of $80,000 for you and $30,000 for your wife. Your additonal $10,000 income will be subject to fireign tax credit. Another words, you will be able to claim a credit for UK taxes that you pay on your US return thereby avoiding double taxation. You should be aware that once in a foreign country, your overall effective tax rate (once you have done your US taxes and UK taxes) is that of a country with the higher tax rate . In this case it is UK.

UK will tax you on your benefits as well as your salary and bonus. So, yes, they will tax the COLA, housing, car allowance , etc....although this may not be the case, if you are coming to the UK for a period of less than 2 years provided that you are sent to the UK by your US employer.

If you have any more questions, let me know...
Helen