[Submariner]

So after searching these forums and spending a highly unpleasant hour on the IRS website, I still could not find answers to the below questions. Your collective expertise would be extremely appreciated.

1) Does the US charge tax on housing allowances?
2) At what tax bracket do expats pay US taxes? (ie, with a salary of $100,000 USD, does one pay in the $100,000 bracket or $20,000 bracket - which is what's left after the $80k exclusion?)

Thank you.

[tx75070]

My understanding is the tax braket is on the 100,000 not the 20,000. It used to be the other way around

[nina_70]

As far as I know you do not pay US tax on the 1st $80K. It's exempt, so they don't count it in your US taxes. What you'll see on your 1040 forms is a -$80,000 on line 21 ("other income"). At least that's what my last few years of forms have looked like. However you'll need to pay local taxes on your income so the $80K isn't tax free so to speak.
Note/ You can only claim this exemption when you've satisfied "Physical presence" in Hong Kong (i.e. you've been in Hong Kong long enough to officially break residence in USA). See form 2555

[Submariner]

So regarding US tax on housing allowance:

If we're paying an additional 10% of our income to HK for the benefit of a housing allowance, do we still pay US taxes on our housing allowance? If so, isn't this double taxation?

[Krad]

yes, it is double taxation, but it still applies. Due to the recent law changes, housing allowances now count towards the 80k exemption, so even if you are paying HK taxes on that housing allowance, you'll probably also have to end up paying US taxes for it.

At least you can feel special about living in one of the two countries left in the world that requires its expatriates to pay taxes in their home country.

[tx75070]

Submariner- just PM'd you.

[nina_70]

It's not really double taxation. HK & USA have a tax treaty so that you don't get double-taxed. You will get a Foreign tax credit for the tax you pay in HK, and for US side you'll only get taxed on income above the $80K mark. Usually, you will end up paying lower taxes than you would have done in the USA (since HK baseline taxes are lower). You definitely won't pay more than you did there.