I have no idea how many SG people this might affect, but I thought I'd post it anyway, because it looks interesting.
You could say American expatriates were ambushed in May 2006, when the U.S. Congress passed a new tax law - retroactive to the previous January - that raised the tax bracket on anything U.S. expats earned overseas beyond a fixed amount, and put a cap on expat housing allowances.
"I had to tell him that next year, for the first time he will have to pay U.S. taxes," Horton said.
But while 20 years ago U.S. citizens who worked in high-tax places like France or Austria were able to use their tax credits to offset all U.S. taxes, these days many countries' tax systems are becoming more competitive, and their top rates have fallen.
While the French top tax rate of 40 percent is still higher than the U.S. top rate of 35 percent, the French permit taxpayers to deduct large social security payments that cover medical insurance and other obligatory social payments from gross income. The United States does not. The French also allow deductions for child support and support of aged parents, and credits for housekeeping help if done within the legal framework. In the United States, there are no tax benefits for these expenditures.
The bottom line is that in some cases, despite higher nominal tax rates, the tax liability overseas may actually be lower than the U.S. tax liability.
Still, it may not be as bad as all that:
Horton said that not everyone has felt all the pain of the U.S. law. "Now unused tax credits are being used to fill the gap," he said. "It will take years for the majority of long-term expats to feel the pain."
SockPuppet
I'm lost
July 2006
DEC 29, 2007 07:01 PM