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Question for the Money Doctors

Question submitted on Dec 10, 2012.

Question

Hello

My husband and I are both U.S citizens and lived overseas in Australia from January 2012-July 2012. I did not work, but he was on a working holiday visa and made about $25,000 in our stay there. We got about $3,700 in taxes back from the Australian government, will we have to claim the money as income on our 2012 return here in the United States?

Answer

The Australian tax reimbursement will be subject to US Income taxation, to the extent you receive the benefit of a Federal income tax (itemized) deduction or credit for the Australian taxes paid during 2012 on your 2012 income tax return.

You didn''t ask, but I thought that I should point out that generally, as a U.S. citizen, your worldwide income, including the income earned in Australia is subject to U.S. income taxation, regardless of where you are living.

IRS Publication 54 is always a good reference tool for US citizens working abroad. The publication discusses special tax rules for U.S. citizens who work abroad or who have income earned in foreign countries.

IRS Publication 54 discusses several tax provisions applicable to US citizens working abroad, such as:

  • Foreign earned income exclusion
  • Foreign housing exclusion and deduction
  • Foreign moving expenses
  • Foreign tax credit
  • Tax treaty benefits

That being said, please note that the income tax rules applicable to expatriates are very complex and that you would be well served by contacting a CPA/PFS who will be able to help you analyze the tax rules and whether or not you are eligible for treaty benefits. Please visit www.findacpapfs.org to find a CPA/PFS near you.


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