Today TaxMama hears from Catherine in the United Kingdom. “I am a US citizen, employed by a UK employer and living and working in the UK where I pay taxes. I own an apartment in NY which I rent out. I report the rental income on my US tax return. Must I report my UK income as well?”
Dear Catherine,
Well that sounds like a delightful place to live.
Yes, you should be reporting the UK income. Americans must report all their worldwide income.
You have two ways of reporting the income:
1) Report the full income and deduct the UK taxes you pay as a credit to offset all or part of the US taxes.
Remember, if you are still a NYS resident, you have to report all the income for New York State, too. And I don’t know if NYS allows for foreign tax credits or deductions. So, if you’re not planning to return to live in NY, be sure to establish yourself as a non-NYS resident. Look up their rules for residency.
https://www.tax.state.ny.us/
2) You can use the foreign earned income exclusion of $91,400 (2009) That is reported on Form 2555
https://www.irs.gov/pub/irs-pdf/f2555.pdf
Of course, NYS does not offer the same benefit.
For more information about federal tax breaks, click here.
And remember, you can find answers to all kinds of questions about living overseas and other tax issues, free. Where? Where else? At TaxMama.com.
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- New York State Tax website ::
- IRS Form 2555 :: Foreign Earned Income Exclusion
- IRS FAQs :: Americans Living Overseas
- Roger B. Adams, EA :: TaxMama's International Expert
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