Do you live and work abroad?
If you do, you’ll want to know if your business-income qualifies for the new 20-percent Section 199A tax deduction.
Sadly, we don’t have great news for you. However, if you play your cards right, and review the strategies explained in this article, it’s very possible that you won’t owe much tax to Uncle Sam.
What issues will you have to deal with if you want to minimize your tax bill?
You’ll find answers to all your questions when you read my new article titled Q&A: Do I Get a 199A Deduction Working Abroad?
Three issues you’ll have to deal with
if you want to reduce your tax bill:
Issue #1: Qualification requirements the IRS expects you to meet. To qualify for the Section 199A deduction, your business-income must be connected with the conduct of a trade or business within the United States. You’ll also need to split your business into two Schedule Cs to determine how much of your net-business-income comes from a U.S. source versus a foreign-source. You’ll get all the details when you read the full article.
Issue #2: How living and working abroad impacts your income-tax responsibilities. There are two ways you can reduce or eliminate U.S. income tax on your foreign-sourced income. You can consider using the foreign-earned income exclusion or the foreign tax credit. There’s a lot to say about this subject, which is why I urge you to read the full article.
Issue #3: Dealing with the self-employment tax. You already know you need to pay a self-employment tax of 15.3-percent on your net Schedule C income. However, the U.S. has “totalization agreements” with certain countries that let you avoid double Social Security taxation. These agreements usually apply to self-employed individuals like you. You’ll get the whole story when you read the full article.