Let’s face it -the United Arab Emirates (UAE) is a hub for all things finance and business in South Asia. That’s why it has become a flourishing expatriate community. In fact, by some estimates, around 88% of the country’s population includes expatriates from various nations. This is why it has a diverse society.
Having said that, if you are a US national/ citizen living in Dubai, there’s a high chance that you aren’t quite sure about filing US taxes from abroad in Dubai. Don’t be alarmed – because there’s literally no shame in that! In fact, most people don’t understand the nuances of US taxes – and whether or not they are liable to pay taxes from abroad. Luckily you have our team from Expat Global Tax at your disposal – the best US expat tax services in Dubai.
Like we just said, you are not alone! There are millions of US citizens living in different corners of the world, and they all have the same query. Expat tax laws are challenging to navigate, and more so, when it comes to the United States of America. This is why a lot of US citizens and permanent residents are uncertain/ confused about their tax filing obligations. That’s why, being a US accounting service in Dubai, we’ve taken it upon ourselves to help US expats in Dubai.
For starters, US citizens or green card holders are taxed on their global income, even when they aren’t staying in the United States. So, if you are a US citizen living in UAE while also earning in the Gulf country, you are bound to report all that to the US IRS or Internal Revenue Service.
But there’s more to this! If you are a US citizen and working in the UAE, while also earning some additional interest income from the US, you will still have to report your earnings from UAE. In short, as a US expat, your tax filing requirements/ obligations primarily hinge on your income threshold as defined by the IRS. Thus, it is always better to reach out to a professional US tax advisor in UAE to get a complete picture, comply with the tax laws, and avoid any and all penalties.
For individuals, the IRS has set an income threshold of $12,950. However, for married couples who wish to file together, the income threshold has been set at $25,000.
At Expat Global Tax, we have been actively helping US citizens in the UAE for over a decade now. And yet, we often come across people who wonder why they are supposed to pay USA tax in UAE when they live in and earn income from Dubai/ UAE. Well, you must understand that filing US tax returns doesn’t always lead to paying taxes! Confused? Well, here’s an example to help you with the scenario.
Imagine a person – a US citizen and green card holder having a permanent residency in Dubai, having a foreign earned income of $100,000 in a tax year.
Now, for the 2023 tax year, the US foreign earned income exclusion was set at $120,000. So, if it is currently pegged at $130,000, the person will qualify for the foreign earned income exclusion. Why? Because his income in a year is less than the set threshold. As a result, he will pay 0 tax as a US citizen living abroad taxes in Dubai.
That said, in spite of the fact that your income comes under the foreign earned income exclusion, you will still have to report your income to the IRS every tax year.
The Head of Household filing is the status designated by the IRS which is often advantageous to both married and unmarried parents with a non-American spouse. So, this includes individuals either married or divorced or people who are legally separated.
Wondering whether or not you can use the Head of Housing status for being married in the UAE? Well, as a renowned US tax service in UAE, we can confirm that any US citizen living in any corner of the world, and married to a non-US individual can claim the Head of Household status if they have a dependent or qualifying child, provided they offer more than 50% of that individual’s support.
This can be effective when you have children or even a parent depended on you. It also includes situations when you have a child of a certain age, who stays with you for more than 6 months in a year.
The term FBAR stands for Foreign Bank Account Report. As for when you need to file an FBAR, if you own a bank account or multiple such accounts outside the US, there are a few filing requirements to be met.
For this, you’ll need to consider all your non-US bank accountants, including any and all investment accounts. Take the highest balance from each account during the calendar year and add it all up. If the total amounts to US$10,000, you must file an FBAR. In fact, you are supposed to report every non-US account, irrespective of whether or not you have any balance in those.
Being your US tax advisor in UAE, we’d recommend filling out the FBAR form by April 15, though there’s often an extension to file until October 15. It is important to note that FBAR is purely a reporting requirement and you do not quite pay taxes on the money you hold in the non-US accounts. However, if the foreign bank accounts start generating income, such as interests, the income has to be included in the tax return and is subject to taxation if and when it meets the set criteria’s.
Capital gain refers to profits from stocks, shares, and crypto. It is classified into short-term and long-term gains, and are treated differently. In fact, there are different taxes for the varied types of capital gains.
Short-term: These are taxed at marginal rates, and typically vary depending on income and filing status.
Long-term: These are usually taxed at a flat rate of 20%, with an added Net Investment Income Tax of 3.8%.
Imagine buying a few shares and selling them off within 12 months for a profit of $20,000. This will be added to your salary as short-term gains and will accordingly influence the tax bracket. However, if it turns out to be your sole income in a year, it might be eligible for the standard deduction.
Well, to put it simply, the percentage of your shares in the foreign cooperation determines your filing requirements. For instance, let’s say you own 25% of a business set up in Dubai, with the other 75% owned by non-US individuals. In such a case, our team of American tax consulting in Dubai will help you fill up Form 5471. In fact, as per the IRS rules, whenever a US citizen owns more than 10% of a non-US corporation, he or she is liable to report it to IRS.
This becomes a little more confusing when you own more than 50% of the corporation. It then classified as a Controlled Foreign Corporation (CFC), which then has different tax implications. Connect with our team at Expat Global Tax to know more about this.
Inheritance tax is also at times referred to as estate tax, and is basically tax on the transfer of an estate from a deceased person. When a US citizen receives assets from a non-US parent, he or she must report it to the IRS. It is usually reported through Form 3520. However, we will advise you to connect with our US accounting service in Dubai for more details on this.
That said, it is worth mentioning that inheritances are usually not taxable, however, if the same generates income, it can be taxed.
US expat taxes can be a pain if you are not particularly aware of the expat tax laws, and that’s where we at Expat Global Tax come in. Ours is an American tax service in Dubai that you can actually count on. If you want to make sure that you pay the bare minimum in terms of taxes, you must work with an accountant who understands every aspect of reducing one’s tax liability.
At Expat Global Tax, we have an experienced team for meting out American tax consulting in Dubai. We work exclusively with US expats, and help them navigate the intricacies of complex US expat tax laws. Working with a specialist has never been this easy. Call us for a free consultation now!
For your Get Free Quote on any tax related matters, please contact us via the phone number or email listed below or request a call back using the forum.
