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Many expats think how much taxation on dual citizenship can be impacted varying on where you stay. To aid answer this age-old doubt, our accountants have developed a hypothetical comparison of tax of two different expats with the similar earning to know how much where you stay affects your dual citizen taxation

US Citizenship: whether to keep or Drop

The underlying problem that expats face is: how does my living place affect my taxation of dual citizens? The answer can be complicated but it is best explained by reviewing the tax filings of two different dual citizen persons. One of our hypothetical income taxpayers named John. The taxpayer is a dual citizen of the UAE and the US. Her Cousin, Julie, who is a taxpayer is a dual citizen of the US and the UK

Taxes for Dual Citizens in the UAE

First, let us discuss John’s case. Something to remember: there is nothing such personal income tax in the UAE. There is no requirement of individual registration of tax or any reporting obligations. However, in the scenario of a dual citizen, the US taxes, the income tax of its citizens as well as residents without any regard to where they stay or work, means that you might have a US tax liability from the earnings you get in the UAE.

Let us assume that John is single, who works for an organization in the UAE. He gets a salary of approximately $ 150,000 annually. For 2019, John’s US income taxation will be as follows:

After considering the Foreign earned income exclusion $105,900 for 2019 and the standard deduction amount $12,000 for the single filing status, John’s income tax would be $32,100. The amount due in the US that is the resulting tax will be $7,704.

In the UAE, John will not pay any income tax. In this case, the US citizenship “cost” is $8,000 for that particular year.

Taxes in the UK for Dual Citizens

Let us consider that cousin Julie who is a taxpayer is also holding dual citizenship of the UK as well as the US and is single. Her US tax liability will be equal to the above example discussed. Now, hold that thought as we are going to evaluate the UK tax.

The UK, unlike the UAE, is going to tax Julie. After considering the UK tax-free allowance which is same as the standard deduction of US that is $8,334 differs as per exchanging price, the tax on the remaining income roughly is $47,000 does not include the National insurance tax of UK that is another $8,500 more!

So, you might be thinking that dual citizen John will have a huge bill on tax on both sides. But, it is not the scenario. Since the US provides a foreign tax credit scheme that is used to offset tax because in the US with tax paid foreign on the similar income, is the US tax owed that will get reduced to $ zero.

In this case, the US Citizenship tax cost is nothing effectively

As you can observe, the dual citizenship or the tax regarding cost is itself a complex process. However, in most of the cases, the abroad tax rate is high, so through the foreign tax credit scheme or FEIE, no US tax is generally due- but the income tax return should be filed to report the earning. Accountants Are Professional on the Taxation of Dual Citizens

Tax calculations for dual citizens can be a complicated process and differ based on individual situations. Also, to file your income tax return in case of dual citizenship, you can consult our experts. Our experts have thorough knowledge about dual citizenship taxation. There resolve client queries in no time. They ensure to provide the best guidance to every client standing apart when it comes to dual citizenship taxation. If you would like to have professional and expert guidance on your unique circumstances, then please get in touch with today!

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