American Tax For US Residents Living UAE

Living in a foreign country is an incredible experience but at the same time, it can be very daunting and adjusting to different cultures and customs. 

If you are an American expatriate living in Dubai or the UAE, you need to know that you are required to file US taxes if your income meets the filing threshold. All US citizens and green card holders who meet the filing threshold for the year are required to file a US federal tax return and pay taxes to the IRS, regardless of where in the world they live, or where their income is generated.

Dubai itself has more than 30,000 US citizens residing, and it still attracts a lot of immigrants because it is an internationally recognized financial and commercial center. 

Americans living in Dubai are better off using Foreign Income Exclusion to exclude the foreign earned income. The exclusion amount changes every year; for 2019, you can exclude up to $105,900. You can also use Housing Income Exclusion; please check with your tax advisor for eligibility. 

The governments of the US and the UAE share taxpayer bank accounts info with the IRS, so don’t consider not filing or not fully disclosing your income on your return. The penalties for tax evasion for expats are severe. With this said, if your foreign bank accounts aggregate balance is $10,000 or more at any time during the year, you are required to file F BAR foreign bank account reporting on form 114.

Please note that the form 114 is only information and is filed with FINCEN; you are not paying any tax on the bank balances but not disclosing your foreign accounts can lead to severe penalties. 

Similarly, if you have foreign assets worth $250,000 individually, you are required to file form 8838 which is filed along with the US Federal returns. 

If you are a US citizen, green card holder, or a dual citizen and did not know about filing US returns, IRS has an Amnesty Program. If you are approved by the IRS for this program, you can come in compliance with your US returns by filing last 3 years of US returns and 6 years of F BAR.