FlynLow

Question for the tax experts...

1. If you move to HK, you get the expat tax break, correct? Understand this to mean that you are exempt from the first 80k or so of taxes?

2. You pay Honk Kong taxes, of up to 15%

So do you really get a tax break

If you make 220k, married, one kid no other deducts, the turbo tax tax rate is 44k

If you take off the 80 and get taxed on 140, the tax rate is 22k

15% of 220k is 33k.

So what does that really mean, is you would owe, 22k to feds and 33k to the commies, fedex would theoretically pay the difference between the 55k and the 44k?

Just trying to get a conceptual idea of the tax implication and whether or not you get a real tax break as an expat or not under the LOA?

Jumbo Pilot

Under the LOA the company keeps your expat credit (Foreign income tax exclusion) and you are subject to "Tax Equalization". Your taxes will be prepared by PWC and you will pay taxes as if you lived here in the states... or so they say.

Our Negotiating Committee negotiated away the ability to keep the expat tax credit of $82,400 with the LOA. That has passed and I'm getting over.

I hope this begins to help.

JP

FlynLow

I see what you are saying, but getting the expat tax break, I would have paid more money due to the hong kong taxes, so the LOA did at least keep me at the US tax rates....

Am I missing the point on that? Again, I was using the basic turbo tax numbers....

FlynLow

ALSO, does any one have a clue on what the Can taxes would be..?

hyperone

I found this. Maybe it will help.

From the LOA: FDA in HK and Paris:
"Federal Tax Equalization Services
Pilots accepting permanent vacancies in CDG or HKG are both entitled and required to use the tax equalization procedures and tax return filing services (US and foreign) offered by the Company through its vendor. The purpose of tax equalization is to provide that a pilot bears approximately the same US Federal tax burden as he would pay if he were assigned to a domestic base rather than CDG or HKG. To facilitate accurate tax computations and reporting, pilots will be required to provide all necessary tax information to the appointed tax provider."

From www.globaltaxhelp.com/taxbasics.htm:
Foreign Earned Income Exclusion
-
If you are a full time resident abroad for a full calendar year, or live there for 330 days out of any consecutive 12-month period, you can exclude up to $80,000 of earned income from U.S. Income Taxation for 2003, 2004, and beyond. …. You can also claim an additional exclusion or deduction for your foreign housing expenses exceeding a standard amount established by the Federal Government. 


Foreign Tax Credits
-
You may have income for which you’ve paid foreign tax, but that cannot be excluded from U.S. taxation. GlobalTaxHelp.com can help you to claim Foreign Tax Credits that can be used to partially or completely offset U.S. taxes that accrue on this same income. In higher tax countries, you’ll accrue such tax credits faster than you’ll ever be able to apply them; in lower tax countries, you will likely be able to apply most or all such tax credits against U.S. tax liability on this same income.


It sounds like you may need to redo your calculations. I doubt turbo tax is going to answer your questions. GlobalTax.com might be a good source to get those questions answered.

FlynLow

I even have been getting deeper also and finding more mired answers...will need to see how it plays out with the price waterhouse consultation...but I'm not expecting to see that you get any break...at all...

thanks for the help hyper

Gunter

"We are both entitled and required to use tax equalization"

I guess the entitled part is meant to make us feel like we are getting a wonderful benefit since being required to use equalization makes it superfluous.

...It's not working....

FDXLAG

Yes, this is true because you are a FDX Capt. However most of your F/O will end up paying more in taxes then if tax equalization was not required.

Falconjet

In a typical expat situation, the company would pay the foreign taxes and you would pay your US taxes, with the 85K exemption.

For some reason, such an arrangement wasn't befitting those of us without the extraordinary skills of management, at least in the eyes of FedEx and our MEC.

Much of the consternation over the LOA was the fact that there actually is no "tax break" at all under the tax "equalization" scheme that the company was able to dupe us into.

FJ

BrownGirls YUM

Since you are using Turbotax, just punch the numbers in as if you were an expat. What your example is missing is the US tax credit for what you would pay to the Hong Kong gov't. So 33k goes to the HKG govt. Your US tax burden includes the FEIE, but also, that 33k paid to HKG is creditable to your US taxes. Your US burden would be zero.


For those going to Hong Kong, equalization is grand theft, especially if one is moving there from a state that taxes your income.

In simplest terms, FedEx pays your actual tax burden (33k in your example) and takes from you a "hypothetical tax" as if you were living in the state from which you relocated. Run them numbers.