The increasing number of Americans take overseas contractor jobs to support U.S. military personnel. Moreover, there is a substantial demand for overseas contractors in the Middle East, Africa and throughout Europe. Working in a danger zone might be a challenging but at the same time quite a rewarding experience. Highly-skilled overseas contractors receive lucrative packages including various benefits. A list of benefits might be quite extensive and it is important to understand the expat tax implications of each benefit.
The benefits might include:
- Hostile fire zone/danger pay
- Housing allowances
- Cost of living allowances
- Bonus incentives
- Paid meals
- Paid vacations, holidays and personal time off
- Medical/dental for yourself and family members
- Life and Accidental Death and Dismemberment Insurance
- 401(k) or similar retirement plans
- Flexible spending accounts
One thing to remember is that overseas contractors are required to file US expat tax return and pay US income taxes even in spite of the fact that they work in a foreign country. However, they can claim foreign earned income exclusion, foreign housing exclusion as well as foreign tax credit if they meet the requirements.
Another thing to mention is that overseas contractors are considered self-employed taxpayers for US expat tax purposes. As a result of it, they can claim various expenses and might be subject to self-employment taxes. We publish many valuable articles to help you learn about various expat tax as well as international tax issues. Please search our Expatriate Tax Blog and sign up for our newsletter to get the latest tax news and advice.
International tax experts at Expattaxcpaservices.com have helped numerous clients working in Iraq, Afghanistan and Africa. Our expat tax CPAs are pleased to assist with various overseas tax issues and US expat tax questions.