Publication 54 - Tax Guide For U.s. Citizens And Resident Aliens Abroad - 2006 Page 2
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44rates that would have applied had you not
Maximum self-employment tax. For 2006,
year, but only
/
the number of days of
1
3
the maximum amount of net earnings from
claimed the exclusions. See the instructions for
presence in the first preceding year,
self-employment that is subject to the social
and only
1
/
the number of days in the
Form 1040 and complete the Foreign Earned
6
security part of the self-employment tax has
second preceding year.
Income Tax Worksheet to figure the amount of
increased to $94,200. All net earnings are sub-
tax to enter on Form 1040, line 44. If you must
ject to the Medicare part of the tax. For more
For more information on resident and non-
attach Form 6251 to your return, use the Foreign
information, see chapter 3.
resident status, the tests for residence, and the
Earned Income Tax Worksheet provided in the
exceptions to them, see Publication 519.
instructions for Form 6251.
Maximum contribution to individual retire-
ment arrangements (IRAs) for those age 50
Housing expenses — base amount. The
Filing information. Chapter 1 contains gen-
or older. The maximum amount you can con-
computation of the base housing amount (line
eral filing information, such as:
tribute to your traditional IRA for 2006 has in-
32 of Form 2555) has changed and is now tied to
•
Whether you must file a U.S. tax return,
creased to $5,000 if you are age 50 or older.
the maximum foreign earned income exclusion.
•
IRAs are discussed in detail in Publication 590,
When and where to file your return,
The amount is 16 percent of the exclusion
Individual Retirement Arrangements (IRAs).
•
amount (computed on a daily basis), multiplied
How to report your income if it is paid in
by the number of days in your qualifying period
foreign currency,
that fall within your 2006 tax year. For 2006, this
•
How to determine your filing status if your
Reminders
amount is $36.12 per day ($13,184 per year).
spouse is a nonresident alien, and
See Housing Amount under Foreign Housing
•
Exclusion and Deduction in Chapter 4.
Whether you must pay estimated tax.
Change of address. If you change your mail-
ing address, be sure to notify the Internal Reve-
Housing expenses — maximum amount.
Withholding tax. Chapter 2 discusses the
nue Service using Form 8822, Change of
The amount of qualified housing expenses eligi-
withholding of income, social security, and Medi-
Address. If you are changing both your home
ble for the housing exclusion and housing de-
care taxes from the pay of U.S. citizens and
and business addresses, you need to complete
duction is now limited. See Limit on housing
resident aliens. It will help you determine if the
two forms.
expenses under Foreign Housing Exclusion and
correct amounts of taxes are being withheld and
Deduction in chapter 4.
Photographs of missing children. The Inter-
how to adjust your withholding if too much or too
nal Revenue Service is a proud partner with the
little is being withheld.
Exemption amount. The amount you can de-
National Center for Missing and Exploited Chil-
duct for each exemption has increased to
dren. Photographs of missing children selected
Self-employment tax. Chapter 3 discusses
$3,300 in 2006.
by the Center may appear in this publication on
who must pay self-employment tax.
pages that would otherwise be blank. You can
Exemption phaseout. You lose part of the
help bring these children home by looking at the
benefit of your exemptions if your adjusted gross
Foreign earned income exclusion and hous-
photographs and calling 1-800-THE-LOST
income is above a certain amount. The amount
ing exclusion and deduction. Chapter 4 dis-
(1-800-843-5678) if you recognize a child.
at which the phaseout begins depends on your
cusses income tax benefits that apply if you
filing status. For 2006, the phaseout begins at:
meet certain requirements while living abroad.
You may qualify to treat up to $82,400 of your
•
$112,875 for married persons filing sepa-
income as not taxable by the United States. You
Introduction
rately,
may also be able to either deduct part of your
•
$150,500 for single individuals,
housing expenses from your income or treat a
This publication discusses special tax rules for
limited amount of income used for housing ex-
•
U.S. citizens and resident aliens who work
$188,150 for heads of household, and
penses as not taxable by the United States.
abroad or who have income earned in foreign
•
$225,750 for married persons filing jointly
These benefits are called the foreign earned
countries. As a U.S. citizen or resident alien,
or qualifying widow(er)s.
income exclusion and the foreign housing de-
your worldwide income generally is subject to
duction and exclusion.
U.S. income tax, regardless of where you are
However, beginning in 2006, you can lose no
To qualify for either of the exclusions or the
living. Also, you are subject to the same income
more than
2
/
of the amount of your exemptions.
3
deduction, you must have a tax home in a for-
tax filing requirements that apply to U.S. citizens
In other words, each exemption cannot be re-
eign country and earn income from personal
or resident aliens living in the United States.
duced to less than $1,100.
services performed in a foreign country. These
Resident alien. A resident alien is an individ-
rules are explained in chapter 4.
Standard deduction. The standard deduction
ual who is not a citizen or national of the United
for people who do not itemize deductions on
If you are going to exclude or deduct your
States and who meets either the green card test
income as discussed above, you must file Form
Schedule A (Form 1040) is, in most cases,
or the substantial presence test for the calendar
higher for 2006. The amount depends on your
2555 or Form 2555-EZ. You will find an example
year.
with filled-in Forms 2555 and 2555-EZ in chap-
filing status, whether you are 65 or older or blind,
ter 4.
and whether an exemption can be claimed for
1. Green card test. You are a U.S. resident
you by another person. The amounts for the
if you were a lawful permanent resident of
Exemptions, deductions, and credits.
standard deduction for 2006 are shown in the
the United States at any time during the
Chapter 5 discusses exemptions, deductions,
instructions for your tax return.
calendar year. This is known as the green
and credits you may be able to claim on your
card test because resident aliens hold im-
Itemized deductions. If your adjusted gross
return. These are generally the same as if you
migrant visas (also known as green cards).
income is above a certain amount, you may lose
were living in the United States. However, if you
2. Substantial presence test. You are con-
part of your itemized deductions. In 2006, this
choose to exclude foreign earned income or
sidered a U.S. resident if you meet the
amount has increased to $150,500 ($75,250 if
housing amounts, you cannot deduct or exclude
substantial presence test for the calendar
any item or take a credit for any item that is
married filing separately). However, beginning
year. Under this test, you must be physi-
in 2006, the amount by which these deductions
related to the amounts you exclude. Among the
cally present in the United States on at
topics discussed in chapter 5 are:
are reduced is only 2/3 of the amount of the
least:
•
reduction that otherwise would have applied.
Exemptions you can claim,
a. 31 days during the current calendar
•
Filing requirements. Generally, the amount
Contributions you can deduct,
year, and
of income you can receive before you must file
•
Moving expenses you can deduct, and
an income tax return has increased. These
b. 183 days during the current year and
•
amounts are shown in chapter 1 under Filing
the 2 preceding years, counting all the
Foreign taxes you can either deduct or
Requirements.
days of physical presence in the current
take a credit for.
Page 2
Publication 54 (2006)
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