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US Citizen Double Taxation Question

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US Citizen Double Taxation Question

Postby grfisher » Wed, 19 Mar 2008 4:41 am


I'm hoping someone can help me out with a question. I'm nearly ready to accept an offer but I'm having difficulties determining what percent of my salary will be taxed by the US. Determining the Singapore tax is easy, but then calculating the US tax is more difficult.

Am I safe to use a formula something like this?

((Total Compensation - $85,700) * US Tax Rate) - Singapore Tax

What I'm guessing is that I can only deduct a portion of the Singapore tax. Is that true?

If you aren't sure of the formula, I'd just be curious to know anticdotal comments on what percentage you've been paying. :)

Thanks in advance for your help! :)

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Postby sundaymorningstaple » Wed, 19 Mar 2008 1:04 pm


The US tax problem is not quite that simple. For your education I would refer you to Publication 54 which can be downloaded in PDF from from here:

Publication 54 Tax Guide for U.S. Citizens and Resident Aliens

Please download and have a read starting on page 40 regarding the filing of form 1116 Credit for Foreign Income Taxes. Specifically regarding the fact that you cannot take tax credits on income excluded on 2555 (Income Earned Abroad Exclusion). Additionally, you need to try two ways to see which is of better benefit. (either as a tax credit - direct write down of taxes or as a deduction of income as an itemized deduction).

Also pay special attention to the warnings of taking both on the same income.

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Postby Strong Eagle » Wed, 19 Mar 2008 2:01 pm

The foreign earned income exclusion applies only to _earned_ income.

So, let's say that you earned USD 100,000 and had dividend/rent income of $20,000. You would get an earned income exclusion of USD 87,500 leaving you with US tax to pay of USD 12,500 PLUS your USD 20,000 of dividends for a total of USD 32,500 taxable income. But note that the tax rate applied is the one that would have been applied if the income had not been excluded, that is, you would pay the tax rate on USD 120,000.

There is also a housing allowance exclusion which was changed last year to seriously screw US expats.

You then pay your Singapore income tax on the full income you have earned but it is a lower rate than the US.

The alternative is to take a foreign tax credit and pay US income tax on the full salary but this usually doesn't work out as well because of the lower tax rates in Singapore.

Some companies offer double taxation relief for US employees and many chambers of commerce are working to get this law changed... don't hold your breath.

But as SMS pointed you, you really need to refer to the IRS publication for all the ugly details.

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