US citizen moving to Dubai - form 2350 2555 - International non-resident cross border expert income tax & immigration help e

QUESTION:

Hello,

I and my wife, both US citizens, plan to move to Dubai for 2 years.  We will both be working in jobs over there.  We have a house here which we would like to keep.  What are our tax implications?  How much tax would we pay on an estimated combined income of $250,000 US per year?  What would change if my wife quit her job - annual income would drop to $150K. We also own a startup business in the US which we expect to keep going and generate some income.  How does this impact us?  What would you suggest is the best way forward in our case? What services can you offer - we are in Austin TX.  

Would greatly appreaciate a response.  Thank you in advance for your time.

Regards,

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david ingram replies:

Your wife and yourself  will be tax free on up to about $82,400 (may be indexed for 2007) prorated over the number of days you are out of the US provided you are out of the USD for a full calendar year or 330 out of 365 days.  To claim this exemption, you both must file from 2555 which you can see at:

http://www.irs.gov/pub/irs-pdf/f2555.pdf

The instructions are at:

http://www.irs.gov/pub/irs-pdf/i2555.pdf


We would be happy to look after your out of Country US returns.

If your wife quit a $100,000 a year job, you would be out the $100,000 less about $22,000 income tax (on a prorated averaged basis).

You would still be taxable on the $150,000 less the $82,000 exemption.

Another problem if your wife does not work is that she may spend too much time in the US and you 'could' lose your exemption if you are not careful because you will want to join her. 

To allow you to be out of Dubai for more than 30 days in 365,  it is better to claim the bonefide residence provision than the 330 out of 365 days exemption.  If you file form 2350 to extend the filing of your return, you can claim the bone fide residence for all years provided you are officially in residence in Dubai for a full calendar year meaning from Jan 1 to Dec 31st.   The way the system works for  instance is that being an official Dubai resident from jaqn 1 2008 to Dec 31 2008 woul dallow you to use Oct Nov and Dec of 2007 and Jan to Sept 2009 as exempt time.  However, to qualify the two or thgree months in 2007, you have tio file form 2350 which you can find at.

http://www.irs.gov/pub/irs-pdf/f2350.pdf

You will have a problem finding someone locally who truly understands these forms.  If you decide that I am too far away, Gary Gauvin in Rockwall, Texas is my old business partner in Ottawa, Canada and very experienced in out of country return. His phone number is (469) 273-3399. His web-site is www.garygauvin.com and if you go to google and type - income tax expert -  into the search engine, he and I are usually in the top five.

If you type -  US Dubai Income Tax Expert - you will be amazed.  At any one time, I usually have 20 or 30 clients in Dubai so you would not be alone.