US Expat Taxes for Americans Living in the United Arab Emirates

If you are an American expat living in Dubai, United Arab Emirates (UAE), you should know that you need to file US taxes if your income meets the filing threshold. All US citizens and green card holders who meet the filing threshold for the year are required to file a US federal tax return and pay taxes to the IRS, regardless of where in the world they live, or where their income is generated.

Dubai itself has more than 30,000 US citizens residing, and it still attracts a lot of immigrants because it is an internationally recognized financial and commercial center.

Americans living in Dubai are better off using Foreign Income Exclusion to exclude the foreign earned income. The exclusion amount changes every year; for 2019, you can exclude up to $105,900. You can also use Housing Income Exclusion; please check with your tax advisor for eligibility.

The governments of the US and the UAE share taxpayer bank accounts info with the IRS, so don’t consider not filing or not fully disclosing your income on your return. The penalties for tax evasion for expats are severe. With this said, if your foreign bank accounts aggregate balance is $10,000 or more at any time during the year, you are required to file F BAR foreign bank account reporting on form 114.

Please note that the form 114 is only information and is filed with FINCEN; you are not paying any tax on the bank balances but not disclosing your foreign accounts can lead to severe penalties.

Similarly, if you have foreign assets worth $250,000 individually, you are required to file form 8838 which is filed along with the US Federal returns.

Filling US Expat Taxes As An American Living in Dubai, UAE

If you are a citizen or green card holder of the United States, then you are obligated to file US federal returns and report your worldwide income every year. In addition to the regular income tax return, you are required to report all foreign financial accounts if the aggregate balance during the year at any given time was $10,000 or more. The financial accounts are reported on Form 114.

The US is one of few governments, that tax the international income of its citizens and permanent residents, it does have certain provisions to help its citizens from double taxation including:

• The foreign earned income exclusion allows you to decrease your taxable income on US expat taxes by the first $105,900 in 2019).
• A foreign tax credit that could allow lowering your tax bill on your remaining income by certain amounts paid to a foreign government, and
• A foreign housing exclusion that allows an additional exclusion from income for certain amounts paid for household expenses that occur as a consequence of living abroad.

The UAE has tax treaties with a number of countries but not with the United States. So if you are self- employed and if you have earned $400 or more from self-employment you will be subject to self -employment tax which will be paid to the US but the earned income can be excluded by using the foreign income exclusion.

With proper planning and quality tax preparation, you should be able to take advantage of these and other strategies to minimize or even eliminate your liability on US expat taxes. Please do note that even if you do not believe that you owe any US expat taxes, you will still be required to file a return.

 

 

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