Tax Information for Working Overseas

[southerndoc]

So here is an interesting question I have, although I have a few years before this will affect me.

I will most likely be doing some work in the UK for a few years after I finish my training here in the US.

As a US citizen working for the UK National Health Service, am I required to pay federal income tax? Medicare and social security tax? State tax for my "legal state of residence" in the US?

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[tlew12778]

I'm an American citizen but I live and work in Italy.

Basically you've got two choices when you are overseas. You can either take the foreign earned income exemption (up to $80k) or you can take the tax credit.

In either case you will be paying taxes to your local government (wherever you are residing). In the first case, you basically just pay your local taxes and that's the end of the story. You file a 1040 plus a foreign earned income exemption with the US govt but you generally owe nothing and get nothing (assuming you are earning less than the $80k). In the second case, you get a tax credit on your US taxes for any taxes that you have paid locally. However you are essentially paying US taxes and can take all the deductions and get the refunds. This sounds like a good option theoretically, but you should really just turbotax both methods and see which works out better for you in the end. The rule of thumb (according to the IRS) is to take the exemption so long as you are not earning more than $100k. You can download all the guidelines on the IRS' website.

State tax varies state by state. It depends on where you are currently a resident. You should ask your local state IRS office if they require you to fill in a state tax return for overseas residents.

 

[southerndoc]

Thanks tlew! My salary is going to equate to $120,000 in US dollars, so I guess I'll be paying US taxes.