Irs Publication 54 - Tax Guide For U.s. Citizens And Resident Aliens Abroad

Canadian, Israeli, and Mexican organiza-

New place of work in U.S. If your new place

exclusion under the bona fide residence test or

tions. Under income tax treaties, you can de-

physical presence test for at least 120 days

of work is in the United States, the deductible

duct contributions to certain Canadian, Israeli,

during that tax year.

moving expenses are directly connected with

and Mexican charitable organizations. These or-

If you do not qualify under either the bona

the income earned in the United States. If you

ganizations must meet the qualifications that a

fide residence test or the physical presence test

treat a reimbursement from your employer as

U.S. charitable organization must meet under

for at least 120 days during the year of the move,

foreign earned income (see the discussion in

U.S. tax law. The organization can tell you

the expense is connected with earning the in-

chapter 4), you must allocate deductible moving

whether it qualifies. If you are unable to get this

come in 2 years. The moving expense is con-

expenses to foreign earned income.

information from the organization itself, contact

nected with the year of the move and the

Storage expenses. These expenses are at-

IRS at the address below.

following year if the move is from the United

tributable to work you do during the year in

You cannot deduct more than the percent-

States to a foreign country. The moving expense

which you incur the storage expenses. You can-

age limit on charitable contributions applied to

is connected with the year of the move and the

not deduct the amount allocable to excluded

your Canadian, Israeli, or Mexican source in-

preceding year if the move is from a foreign

income.

come. If you or a member of your family is

country to the United States.

enrolled at a Canadian college or university, the

Amount allocable to excluded income. To

limit does not apply to gifts to that school. For

Moving Expense Attributable to

figure the amount of your moving expense that is

additional information on the deduction of contri-

Foreign Earnings in 2 Years

allocable to your excluded foreign earned in-

butions to Canadian charities, see Publication

come (and not deductible), you must multiply

597.

If your moving expense deduction is attributable

your total moving expense deduction by a frac-

For more information on these treaty provi-

to your foreign earnings in 2 years (the year of

tion. The numerator (top number) of the fraction

sions, write to the

the move and the following year), you should

is the total of your excluded foreign earned in-

Internal Revenue Service

request an extension of time to file your return

come and housing amounts for both years and

International Section

for the year of the move until after the end of the

the denominator (bottom number) of the fraction

P.O. Box 920

following year. By then, you should have all the

is your total foreign earned income for both

Bensalem, PA 19020-8518

information needed to properly figure the mov-

years.

ing expense deduction. See Extensions under

Example. You are transferred by your em-

When To File and Pay in chapter 1.

ployer on November 1, 2007, to Monaco. Your

If you do not request an extension, you

tax home is in Monaco, and you are a bona fide

should figure the part of the moving expense

Moving Expenses

that you cannot deduct because it is allocable to

resident of Monaco for the entire tax year 2008.

the foreign earned income you are excluding.

In 2007, you paid $6,000 for allowable moving

If you moved to a new home in 2008 because of

You do this by multiplying the moving expense

expenses for your move from the United States

your job or business, you may be able to deduct

by a fraction, the numerator (top number) of

to Monaco. You were fully reimbursed (under a

the expenses of your move. Generally, to be

which is your excluded foreign earned income

nonaccountable plan) for these expenses in the

deductible, the moving expenses must have

for the year of the move, and the denominator

same year. The reimbursement is included in

been paid or incurred in connection with starting

(bottom number) of which is your total foreign

your income. Your only other income consists of

work at a new job location. See Publication 521

earned income for the year of the move. Once

$16,000 wages earned in 2007 after the date of

for a complete discussion of the deduction for

you know your foreign earnings and exclusion

your move, and $87,600 wages earned in Mon-

moving expenses and information about moves

for the following year, you must either:

aco for 2008.

within the United States.

Because you did not meet the bona fide

•

Adjust the moving expense deduction by

residence test for at least 120 days during 2007,

filing an amended return for the year of the

Foreign moves. A foreign move is a move in

the year of the move, the moving expenses are

move, or

connection with the start of work at a new job

for services you performed in both 2007 and the

location outside the United States and its pos-

•

Recapture any additional unallowable

following year, 2008. Your total foreign earned

sessions. A foreign move does not include a

amount as income on your return for the

income for both years is $109,600, consisting of

move back to the United States or its posses-

following year.

$16,000 wages for 2007, $87,600 wages for

sions.

2008, and $6,000 moving expense reimburse-

If, after you make the final computation, you

ment for both years.

Allocation of Moving

have an additional amount of allowable moving

You have no housing exclusion. The total

expense deduction, you can claim this only on

Expenses

amount you can exclude is $101,688, consisting

an amended return for the year of the move. You

of the $87,600 full-year exclusion for 2008 and a

cannot claim it on the return for the second year.

When your new place of work is in a foreign

$14,088 part-year exclusion for 2007 ($85,700

country, your moving expenses are directly con-

times the fraction of 60 qualifying bona fide resi-

Forms To File

nected with the income earned in that foreign

dence days over 365 total days in the year). To

country. If you exclude all or part of the income

find the part of your moving expenses that is not

Report your moving expenses on Form 3903.

that you earn at the new location under the

deductible, multiply your $6,000 total expenses

Report your moving expense deduction on line

foreign earned income exclusion or the foreign

by the fraction $101,688 over $109,600. The

26 of Form 1040. If you must reduce your mov-

housing exclusion, you cannot deduct the part of

result, $5,567, is your nondeductible amount.

ing expenses by the amount allocable to ex-

your moving expense that is allocable to the

You must report the full amount of the

cluded income (as explained later under How To

excluded income.

moving expense reimbursement in the

Report Deductions), attach a statement to your

Also, you cannot deduct the part of the mov-

year in which you received the reim-

return showing how you figured this amount.

CAUTION

ing expense related to the excluded income for a

bursement. In the preceding example, this year

For more information about figuring moving

move from a foreign country to the United States

was 2007. You attribute the reimbursement to

expenses, see Publication 521.

if you receive a reimbursement that you are able

both 2007 and 2008 only to figure the amount of

to treat as compensation for services performed

foreign earned income eligible for exclusion for

in the foreign country.

each year.

Contributions to

Year to which expense is connected. The

moving expense is connected with earning the

Move between foreign countries. If you

Individual Retirement

income (including reimbursements, as dis-

move between foreign countries, your moving

cussed in chapter 4 under Reimbursement of

expense is allocable to income earned in the

Arrangements

moving expenses) either entirely in the year of

year of the move if you qualified under either the

the move or in 2 years. It is connected with

bona fide residence test or the physical pres-

earning the income entirely in the year of the

ence test for a period that includes at least 120

Contributions to your individual retirement ar-

move if you qualify for the foreign earned income

days in the year of the move.

rangements (IRAs) that are traditional IRAs or

Chapter 5 Exemptions, Deductions, and Credits

Page 31

Irs Publication 54 - Tax Guide For U.s. Citizens And Resident Aliens Abroad - 2008 Page 31

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