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Politics : Politics for Pros- moderated -- Ignore unavailable to you. Want to Upgrade?

To: KLP who wrote (352237)	3/5/2010 8:36:19 PM
From: Elroy	Respond to of 794223

Let's say you make equivalent: $250,000 US You get a US deduction of minus $ 80,000 US Leaving income of approx $170,000 US then you pay tax in the foreign country you live in of say....30% of what was left. $-%51,000 Not quite, the person making $250k salaried in Japan, for example, probably paid $75k (30%, my guess) in Japanese taxes. So they owe tax to the US on $170,000k income, lets say the rate is 30% for simplicity. So they owe the US $51k in taxes, but get a credit of $75k for what they paid Japan, so they owe the US zero. For a resident expat to pay US taxes the foreign country has to have a very low tax rate, or he has to make a whole lot of money (enough to get by both those two big deductions). And that's how I think deduction 2 works - I live in the UAE for the past 8 years, and since they have no income tax I didn't get any deduction 2. So we got taxed on any salaried income above $80k. And both deductions apply to normal earned income. Capital gains, interest and dividends don't get either credit. So....if you live overseas and make $50k per year in investment income, you owe federal taxes as if you lived in the US. I guess the worst hit by this would be wealthy US citizen retirees who live outside the US and don't have a pension/regular income source. They made or inherited a lot of money, are living off of it, and pay taxes as if they lived in the US. If Obamacare is going to do anything to increase health coverage for overseas US citizens, I would like to know. We'll certainly pay more like everyone else, especially since one of the medicare benefit payment sources is a capital gains tax increase. Elroy PS - As the lawyers here have said previously, you get what you pay for! I'm not a tax professional, but this is my understanding.