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Question for the Money Doctors

Question submitted on Oct 31, 2012.

Question

HEllo my husband works in Brazil and has a work visa with his contract being a year long. He pays taxes in Brazil but we would like to know the process of claiming it on our us taxes and will we have to pay in America as well as Brazil? We have an apartment here that is in his name and we have it the whole year but he is only in Brazil for 10 of those months. Thank you for any advice you can give us.

Answer

Assuming you are US citizens and therefore US taxpayers, you would be taxed on your worldwide income, including the income earned in Brazil. If the contract is a year long, it is possible you may qualify for the foreign income exclusion, however, you state he is only in Brazil for 10 months. Any work assignment that lasts one year or less is considered temporary. Therefore, a 10 month assignment would not qualify for the foreign income exclusion.

However, you are eligible to claim the foreign tax credit on all qualified income tax paid in Brazil. The credit eliminates the double tax burden by imposing US income tax only if the foreign tax rate is lower. To claim the credit, file Federal form 1116 with your US return. You may also be able to deduct any unreimbursed travel expenses on Schedule A of your 1040. Seek the assistance of a CPA/PFS with expertise in these topics if you need help at tax time. Visit www.findacpapfs.com to find a professional in your area.


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