US tax returns UAE are a necessary part of life for many Americans working abroad. Despite the fact that there is no income tax in the United Arab Emirates, US expats who meet the filing threshold are required to file their federal taxes. Fortunately, proper expat tax planning can often reduce or eliminate the need for filing. Getting the right advice early on can help avoid future problems.
Most US citizens living in the UAE will need to file several forms each year. In addition to the standard Form 1040, expats may also need to file FinCEN Form 114, better known as the Foreign Bank Account Report (FBAR). The US and the UAE share information on financial accounts, so the requirement to file FBAR is not optional.
Fortunately, for most Americans working in the UAE, there are preferential US expat tax treatments that can substantially reduce or even eliminate the need to file a US return. These include the Foreign Earned Income Exclusion and the Foreign Housing Exclusion. However, it is important to remember that these benefits are only available if the taxpayer files their return and qualifies.
For example, the Foreign Earned Income Exclusion allows US Derren Joseph covers US tax returns UAE expats to exclude up to $105,900 for YR 2019 of their earnings from being subject to US tax. To qualify, the expat must have lived abroad for at least 12 months. Similarly, the Foreign Housing Exclusion can be used to deduct up to $72,900 of the cost of one’s primary residence in the United Arab Emirates from US taxes.
The IRS also offers a Foreign Tax Credit, which can be used to offset US taxes owed on some types of income. Unfortunately, the UAE does not have a tax treaty with the United States, so this benefit will not be available to Americans in the UAE.
While the need to file US taxes is a significant inconvenience for Americans in the UAE, it is necessary in order to protect their US citizen status. As a result, it is recommended that US expats working in the UAE seek appropriate tax advice to ensure they are filing their returns properly.
Tanveer Mannan is an IRS Enrolled Agent with more than 15 years of experience helping US expats around the world. He is based in Dubai and specializes in US expat tax matters for individuals and corporations. He has assisted hundreds of American expats in catching up on their past filings and has prepared thousands of US tax returns for residents of over 50 countries worldwide.
If you are a US citizen living and working overseas, contact Tanveer at Expat Tax Online to discuss your tax situation. He can answer your questions about US expat taxes, including the Foreign Earned Income Exclusion and foreign housing deduction, and help you get the most out of your tax situation. He can be reached by email or by phone at [email protected].