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2006.10.17

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if i own a second home in a foreign country, is mortgage interest deductible?

The changes to the inclusion amount represents a fraud of the most underhanded sort.

My wife has lived and earned income in the US while I have been earning income from a foreign corporation while living in Singapore. Thus, I qualify for the foreign income exclusion while she does not.

The obvious effect of this change is that my wife's entire income is taxed at a significantly higher rate in 2006 than it was in 2005. So while the IRS _says_ they are giving me an exclusion they are actually taxing my foreign income as the difference in taxes that my wife would pay excluding or not excluding my income. Worse, if I take the foreign income exclusion I cannot even take a tax credit for foreign taxes paid.

This is a patently undair situation and should certainly be protested by all expatriates with foreign income.

Thank you.

Mr. Herbert,

I share your pain. I have worked as a contractor with the Federal Government in Germany. I have to pay German taxes because my job does not qualify for the German Technical Expert Status. I filed a 2555 for the Foreign Income Exclusion. My husband is a federal government employee whose wages are fully taxable and we suffered a substantial increase in taxes due to the new law. I recomputed my taxes using the Foreign Tax Credit, but that did not help because AMT kicked in. I recomputed my taxes Married Filing Separately, but again was hit with AMT. I am now, in essence, doubly taxed.

The irony of this is that if my spouse were also a contractor, we would not have suffered a significant increase in tax. But if he is a federal government employee or military member, we have this increased tax burden.

I am an IRS Enrolled Agent and have dealt with taxes for many years. Usually, there is some equity in IRS taxing situations, but I see none here. I feel that the new law was not well thought through. I think it would be more equitable to calculate the increased tax rate only on the additional income attributable to the spouse who claimed the Foreign Earned Income Exclusion.

Mr. Herbert,

I share your pain. I have worked as a contractor with the Federal Government in Germany. I have to pay German taxes because my job does not qualify for the German Technical Expert Status. I filed a 2555 for the Foreign Income Exclusion. My husband is a federal government employee whose wages are fully taxable and we suffered a substantial increase in taxes due to the new law. I recomputed my taxes using the Foreign Tax Credit, but that did not help because AMT kicked in. I recomputed my taxes Married Filing Separately, but again was hit with AMT. I am now, in essence, doubly taxed.

The irony of this is that if my spouse were also a contractor, we would not have suffered a significant increase in tax. But if he is a federal government employee or military member, we have this increased tax burden.

I am an IRS Enrolled Agent and have dealt with taxes for many years. Usually, there is some equity in IRS taxing situations, but I see none here. I feel that the new law was not well thought through. I think it would be more equitable to calculate the increased tax rate only on the additional income attributable to the spouse who claimed the Foreign Earned Income Exclusion.

I'm in a similar situation here in Germany, working for a local firm and my American wife for the US military. Although I'm a British citizen my wages are taxed not only by the German authorities but by the IRS as I am a Green Card holder, thus increasing my wife's tax bill substantially.
Forgive my ignorance, but is the amount of foreign earned income to claimed as an exclusion defined as the amount earned before or after the foreign tax has been paid? My wife thinks its after tax, but then she would, wouldn't she!

I am an American citizen working for the U.S. forces and married to a German citizen - a non-resident alien. The Germans changed their tax system several years ago (retroactively) to do essentially the same thing that the U.S did recently - "exclude" my income but tax husband's income at a much higher rate. This means that we now are being slammed in taxes by two countries. I wanted to take the foreign income credit rather than the exclusion. Turbo tax is trying to force me to take the exclusion. A look at the IRS pamplets is not totally clear on this point. Has the choice of taking the foreign tax credit in lieu of the exclusion disappeared. It would be much more advantageous for me and many others. Thanks.

I work in South Korea. I know I can file a tax exclusion form 2555. I did that last year. The problem this year is that I want to contribute to my ROTH IRA. If I file the form 2555 the government considers me to have no earned income and can not make a 2007 contribution. Is there a way I can still contribute to my ROTH IRA??? The only thing I can think of is not filing form 2555 and paying double taxes allowing me to have earned income which would allow me to contribute.

I'm trying to forecast how much my taxes I will owe since I qualify for the foreign income exclusion under the new law. Do you take the taxes you would pay on the total amount of income and subtract the taxes you would pay on the excluded income (87,500) and that would give you the tax liability. I haven't been able to find any calculators on line to help with this. Any suggestions?

1. Am I entitled to any type of " foreign earned income exclusion" on my US retiree pension while residing in Spain?
2. Could I take a tax credit for foreign taxes paid on my US Income?
Appreciate your comments,
Best regards,

RD Puga

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