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US TAX UPDATE:

What's new for 2009 that will impact U.S. taxpayers living abroad particularly?

  • Foreign Earned Income Exclusion (FEIE) has been increased:
    IRS has increased the maximum foreign earned income exclusion threshold from $87,600 to $91,400.
  • Foreign Housing expense-base amount has also been increased from $14,016 to $14,624.
  • 2009 maximum foreign housing expense can be claimed for living in most cities in China has benn increased from $ 26,280 to $27,420.
  • 2009 maximum foreign housing expense can be claimed for living in high cost localities, Beijing, Shanghai and Hong Kong, remains the same as 2008 and is set as following:

Location             Daily limitation        Annual limitation       Maximum Exclusion
                           US$                        US$                          US$
Beijing:               134.62                     49,137                     35,121
Shanghai:          156.17                      57,001                     42,985
Hong Kong:        313.15                   114,300                   100,284

Foreign earned income - Form 2555 & Instructions:
Use Form 2555 to report your foreign earned income and foreign housing exclusion. Download a blank from the IRS website: http://www.irs.gov/pub/irs-pdf/f2555.pdf. For detailed instructions, please check out: http://www.irs.gov/pub/irs-pdf/i2555.pdf, Instructions for Form 2555. Or please contact us if you have any questions.

Other Matters as quoted from IRS Publication 17:

What's new for 2009

2009 tax rate and quick facts

Making work pay credit
If you have earned income from work, you may be able to take this credit. It is 6.2% of your earned income but cannot be more than $400 ($800 if married filing jointly).

Government retiree credit
You may be able to take a credit of $250 ($500 if both taxpayer and spouse qualify) if you get a government pension or annuity, but it reduces any making work pay credit.

American opportunity credit.
The maximum Hope education credit has increased to $2,500 for most taxpayers. The increased credit is now called the American opportunity credit. Part of the credit is now refundable for most taxpayers.

Alternative minimum tax (AMT) exemption amount increased
The AMT exemption amount has increased to $46,700 ($70,950 if married filing jointly or a qualifying widow(er); $35,475 if married filing separately).

IRA deduction expanded
You may be able to take an IRA deduction if you were covered by a retirement plan and your 2009 modified adjusted gross income (AGI) is less than $65,000 ($109,000 if married filing jointly or qualifying widow(er)). If your spouse was covered by a retirement plan, but you were not, you may be able to take an IRA deduction if your 2009 modified AGI is less than $176,000.

Roth IRA Contribution
You may contribute to a Roth IRA, the contribution limit is reduced (phased out) in the following situations:

  • Your filing status is married filing jointly or qualifying widow(er) and your modified AGI is at least $166,000. You cannot make a Roth IRA contribution if your modified AGI is $176,000 or more.
  • Your filing status is single, head of household, or married filing separately and you did not live with your spouse at any time in 2009 and your modified AGI is at least $105,000. You cannot make a Roth IRA contribution if your modified AGI is $120,000 or more.
  • Your filing status is married filing separately, you lived with your spouse at any time during the year, and your modified AGI is more than -0-. You cannot make a Roth IRA contribution if your modified AGI is $10,000 or more.

First-time homebuyer credit.
The credit increases to as much as $8,000 ($4,000 if married filing separately) for homes bought after 2008 and before May 1, 2010 (before July 1, 2010, if you entered into a written binding contract before May 1, 2010). You can choose to claim the credit on your 2009 return for a home you bought in 2010 that qualifies for the credit. Some current homeowners now also qualify. See IRS website for new changes. http://www.irs.gov/newsroom/article/0,,id=215791,00.html?portlet=7

Tax on child's investment income.   
The amount of taxable investment income a child can have without it being subject to tax at the parent's rate has increased to $1,900.

Recovery rebate credit
Expired in 2009 and no more rebate credit.

Limit on exclusion of gain on sale of main home
Generally, gain from the sale of you main home is no longer excludable if it is allocable to periods of nonqualifed use of the property after 2008. For more information, please see IRS Publication 523 - Selling Your Home.

Additional standard deduction for real estate tax
If you do not itemize your deduction, you can claim an additional standard deduction for real estate taxes you paid.

Capital gain tax rate reduced
The 5% tax rate on qualified dividends and net capital gain is reduced to zero.


The American Recovery and Reinvestment Act 2009
The new act will generally not affect major individual's 2008 U.S. tax filing, but will have impact on 2009 and 2010 tax filing.


For more information , please visit IRS website: http://www.irs.gov/newsroom/article/0,,id=204335,00.html?portlet=6


More 2009 US tax update, tax forms and information in Publication 17 at IRS website: www.irs.gov

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