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Alternative Minimum Tax: In calculating AMT, the following items are not allowed as offsets: Exemptions, Standard Deduction, Interest on second mortgages, state and local taxes, medical expenses, miscellaneous itemized deductions, incentive stock options, long-term capital gains, tax-exempt interest, and tax shelters.
Foreign Earned Income Exclusion: Any U.S. citizen or resident alien residing abroad can qualify to exclude from income up to $85,700 of foreign earnings in 2007 as well as exclude or deduct certain foreign housing amounts. To qualify an American expatriate must earn foreign income and reside in a foreign country.
Residency includes a U.S. citizen who is a bona fide resident of a foreign country for an uninterrupted period that includes a tax year, a U.S. resident alien who is a citizen or national of a country with which the United States has an income tax treaty and who qualifies as a bona fide resident, or a U.S. citizen or U.S. resident alien who is physically present (as opposed to bona fide) in a foreign country or countries for at least 330 full days during any 12 consecutive months.
Foreign Housing Expenses: Housing expenses include rent, utilities, property insurance, fees, residential parking and household repairs. These expenses can only be deducted if you meet the tax home test. It may also be possible to deduct the expenses of a second foreign home for spouse and dependents if essential and certain other requirements are met.
Foreign Tax Credit: You may take the credit for any foreign taxes paid on foreign income to the extent legally owed and paid or accrued as long as the country, as designated by the Secretary of State, does not provide support for acts of terrorism. Any tax credit not allowed according to the complex calculations of Form 1116 may be carried forward and applied to subsequent years.
Moving Expenses: You may generally deduct moving expenses within a reasonable time of starting a new job as long as your new job location is at least 50 miles farther from your former residence than was your old job and you are employed at least 39 weeks during the first 12 months after arriving at your new job. Self employed persons must also be considered as working 78 weeks during the first 24 months. Exceptions to the time test include military personnel, retirees, loss of employment, survivors of deceased persons, death or disability.
Reasonable expenses for travel and lodging, transit and storage costs may be deducted. However, the expenses which related to the Foreign Earned Income Exclusion or Housing Deduction are not deductible.
Treaty Based Return Disclosure: In some cases income normally taxed by IRS may not be taxed as severely by the foreign country of residence. This Disclosure in accordance with tax treaties can have a positive effect in lowering your overall tax liability.