Today TaxMama hears from Sara in Louisiana who has this opportunity . “My husband has been offered a position in Kuwait with a salary of $110K US. They have told him that it will be “tax-free”. If he accepts this position, is this just like working in US as someone who is self-employed? I am employed. Does it make a difference if I work or not?”
Dear Sara,
Well, living in Kuwait should be an interesting experience!
The information your husband has been given regarding his compensation isn’t entirely correct. First of all, the amount of salary he can get tax-free is only $87,900 – and he can’t be working for an arm of the U.S. government (as a civilian…military have different rules).
https://www.irs.gov/businesses/small/international/article/0,,id=96980,00.html
And this only works if he is on payroll. If they treat him as being self-employed, he’ll get that much free from income tax. But he’ll have to pay self-employment tax on that money at the rate of 15.3%. So make sure he’s on payroll.
Does it make a difference if you are employed or not? You bet! If you don’t work, after the first couple of weeks, you’ll be bored out of your mind. And you’ll never make friends of your own. So, do try to get a job, too. If you work while you’re in Kuwait, for a local company (as in non-U.S.), you’ll be able to exclude up to $87,900 also. So that’s not a bad deal at all.
Naturally, nothing is as simple as this. You may face local income taxes. I don’t know Kuwait’s tax system. You may be able to avoid taxes on the rest of your husband’s income using the housing allowance…or not. And if you have other U.S. income, like dividends, rental income, etc., all that will still be taxed.
Don’t forget, if you remain a Louisiana resident, you may face state income taxes on the money.
https://www.rev.state.la.us/
You can learn more about the FEIE at the IRS international site:
https://www.irs.gov/businesses/small/international/article/0,,id=97130,00.html
Personally, I would never take on an assignment like this without consulting with an expert and having him or her run the numbers to see just what this is really going to cost me – both in taxes and duplicate living expenses, if you have to maintain your home back in the States.
The person I turn to for advice is Enrolled Agent Roger B. Adams. You can reach him at . It well worth your while to pay him for an hour or two of consultation. He can help you and your husband structure your compensation so you come out ahead. He’ll be able to do your tax planning and your tax return while you’re overseas.
And remember, you can find answers to all kinds of questions about working overseas and other tax issues, free. Where? Where else? At TaxMama.com
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