“Are there any tax deductions/breaks for a person working in Saudi Arabia but living in usa? “---->Yes.Any US taxpayer shouldn’t be subject to double taxation in US and abroad. I assume that your fiancé is a US person, then he is subject to US taxes(fed/state taxes) on his US source and world wide income; HOWEVER/BASICALLY IN GENERAL, he can claim foreign tax credit on his return as he pays tax(es) to the foreign taxing authority(ies) on his foreign income that he earns in SA. However,he may not claim a tax credit for taxes paid on any income which has been excluded from US taxation using the foreign earned income exclusion or the foreign housing exclusion. His foreign tax credit cannot exceed his US tax liability multiplied by a percentage. The percentage is his total foreign-source income divided by his total worldwide income. He can itemize FTC on Sch A of 1040 line 8 other taxes or o 1040 line 47(in this case, he neds to file form 1116). Any foreign tax credit amount in excess of the maximum limit may be carried back to a previous tax year or carried forward to a future tax year.He can carry-back the FTC to the immediately preceding tax year, or carry-forward the credit for the next 10 tax years.
Since your fiancé is a U.S. citizen or a resident alien of the US and he lives in SA he is taxed on his worldwide income. However, he mayALSO qualify to exclude from income up to an amount of his foreign earnings that is now adjusted for inflation ($$95,100 for 2012). In addition,he can exclude or deduct certain foreign housing amounts(ONLY if it is available ).To claim the foreign earned income exclusion, the foreign housing exclusion, or the foreign housing deduction, he must have foreign earned income,i.e, wages or salaries tips compensation or etc and his tax home must be in a foreign country, and EITHER he must be a U.S. citizen who is a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax year; a U.S. citizen or a U.S. resident alien who is physically present in a foreign country or countries for at least 330 full days during any period of 12 consecutive months OR he MSUT meet the bona fide residence test if he is a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax year.
I guess he needs to visit the IRS Website her for more info;
Foreign Earned Income Exclusion - Can I Claim the Exclusion or Deduction?
“My fiance' is going to work over there but he will be home in the us over 35 days out of the year. So where does that leave us”------>As long as he meets SPT test, he can claim FEIE as described above;he needs to meet the physical presence test if he is physically present in SA for 330 full days during a period of 12 consecutive months. The 330 qualifying days do not have to be consecutive.The physical presence test is based only on how long he stays in SA. This test does not depend on the kind of residence he establishes, his intentions about returning, or the nature and purpose of his stay abroad. Generally, to meet the physical presence test, your fiance must be physically present in SA for at least 330 full days during the 12-month period. He can count days he spent abroad for any reason.He does not have to be in SA only for employment purposes. He can be on vacation time.He does not meet the physical presence test if illness, family problems, a vacation, or his employer's orders cause him to be present for less than the required amount of time.
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