Job Discussion Forums

GabeKessel · Joined: 27 Sep 2004 Posts: 150

What is going on? Are we now supposed to pay tax on housing allowance? Does anyone know anything?

http://newpaper.asia1.com.sg/news/story/0,4136,119738,00.html

I have read that the first $11,000 ( or so) of the housing allowance is now taxable. Does anyone know anything about this?

A lot of teachers in the ME get an allowance that includes housing but is also for transportation, food, etc. Some allowance is paid directly as part of salaries. If one gets such an allowance that has no clear definition, how does one calculate housing allowance?

Stephen Jones · Joined: 21 Feb 2003 Posts: 4124

The Saudis calculate housing allowance as two months of salary, so thewould be the logical thing to do for your tax returns is to give the figure your employer or the government offers in lieu of housing. To the best of my knowledge payments in kind have always been taxable.

veiledsentiments · Joined: 20 Feb 2003 Posts: 17644 Location: USA

I always just included my valuation of the housing in my annual income number... along with my ticket prices. Even adding all three of those together, we TEFL teachers don't get near the $85,000 figure.

VS

stoth1972 · Posted: Wed Dec 20, 2006 10:18 pm Post subject:

I did the same as VS-included the value (since the actual property was not in my name, and often given to me w/o my input) as part of my income. Don't tell me the tax man is coming for me!

veiledsentiments · Joined: 20 Feb 2003 Posts: 17644 Location: USA

It would be a waste of their time because any way you figure it, you wouldn't owe any taxes. We don't earn enough!!

If you suddenly find yourself in "perfect job land"... and are getting a salary of US$7000 a month... hire a tax man so that you know that everything is done correctly... all the right numbers in all the right squares.

But, I suspect that EFL teachers will never have to worry about reaching those numbers... and we can continue to use the 2555EZ. Sad

VS

stoth1972 · Posted: Thu Dec 21, 2006 3:34 am Post subject:

Good point, VS. It actually depends on whether or not you went abroad for the necessary amount of time. My first year, I was subject to taxes, because I was back inside the US for more than 30 days (or whatever the limited amount of time) and I had not yet established the necessary residency time abroad at that point. I can't recall the length of time one must be abroad, but since I started with the September school year, it screwed everything up. Alas, when you earn peanuts, it appears the IRS isn't too bothered.

veiledsentiments · Joined: 20 Feb 2003 Posts: 17644 Location: USA

Actually there is a special procedure for filing to avoid paying tax on that first three-four months. I forget the number of the form... as I recall it was in the 2000's. This form applies for an extension for your tax return until the time that you have reached the 12 months required. You are required to pay any taxes that may have been due on the income for the previous 9 months of that year with the application, but you are then able to avoid any taxes on the actual overseas income. It also requires you to keep track of due dates so that you get all required forms in at the now odd times that they are required. Smile

If you search around on the IRS site, you can probably find this info. (BTW, this isn't a problem your final year abroad even though it is again probably a partial year)

VS

stoth1972 · Posted: Thu Dec 21, 2006 4:57 pm Post subject:

Yeah-upon returning I got some help from H and R Block. Ends up my father, who had been filing my taxes every year I was abroad, thought I had to be out of the US 335 days every single year. I didn't know about the extension on that first partial year, though. Good to know for when we move again.

Bindair Dundat · Joined: 04 Feb 2003 Posts: 1123

veiledsentiments · Joined: 20 Feb 2003 Posts: 17644 Location: USA

Life insurance?? I have never heard of the average TEFL teacher getting life insurance. I have only seen it with those working for some American tied employers who even provide W-2s. Shocked

With school fees dropping for many places, I expect that few will hit the number. My advice for people is to avoid the H&R Block people and download a Turbo Tax program and that way you can play with the numbers. You don't need to be an accountant, but you have to bravely click around and answer the questions in a different interpretations. I have helped people with school fees with their taxes and still adding all of it together they didn't get close to the taxable level. I remember places that used to pay for up to 3 kids, but I don't know if many do that any more - that might do it. Laughing

But the most important thing for Americans abroad is to be sure to file even though you don't owe taxes... unless you plan to never return to the US. And if you think now that you won't, but change your mind in 15 years, you will not have fun with the IRS when you get back. Doing many years of back taxes is NOT fun. And if you spent that time in the Middle East, they may be even less pleasant these days.

VS
(according to the article, the amount is $82,400, not $85,000)

globalnomad2 · Joined: 23 Jul 2005 Posts: 562

There has also always--up till now, anyway; I haven't examined the new law--been a provision in the tax code that overseas housing that is "for the convenience of the employer" and that the taxpayer is required to live in, is exempt from reporting. I have often interpreted that loosely. Obviously, if you are living in on-campus housing, that is certainly required housing for the convenience of the employer. Furthermore, when I was first hired by HCT, they assigned me to my first apartment. To my mind, that is also required and for the convenience of the employer.

veiledsentiments · Joined: 20 Feb 2003 Posts: 17644 Location: USA

Yes, but because no matter how you calculated it, you would still have been under the - probably at that time - $70,000... it didn't really change anything. In all my jobs, I calculated what I assumed the local rent would be and just added it to my pay plus the cost of the ticket. I used a fair market rate and I never got close to the taxable figure. Smile

That is the most conservative way to calculate it, so in the rare case of an audit, it would only involve moving the number to a different space, and I still wouldn't need to pay any taxes.

Where issues like this start to make a difference is if you are a full professor in a fancy villa... or a business executive and petroleum engineer with their huge daily expense allowances... or if they live in a country where there are local taxes.

VS

Bindair Dundat · Joined: 04 Feb 2003 Posts: 1123

veiledsentiments · Joined: 20 Feb 2003 Posts: 17644 Location: USA

globalnomad2 · Joined: 23 Jul 2005 Posts: 562

Veiled, you are not using your calculator. In my first year at the PI my starting salary was $50,000 as ESL instructor (standard for everyone). Housing allowance was Dh 90K ($24,000) and furniture allowance was $12,000. Even if you eliminate the furniture allowance and plane tickets and other benefits in the second year, total remuneration is still $74,000. Obviously, then, it behooves one to do one's best to interpret the housing as being required and for the convenience of the employer.