Tax obligations while training overseas

November 20, 2009

Disability insurance, disability policy cost and tax obligations while training overseas are all addressed

Q: I've been unable to find a residency training position in my desired specialty in the United States and am considering relocating to Germany for this training. Would I still have to file tax returns in the United States while I am away? Would I have any tax obligations for money I make while in Germany?

A: If you are a U.S. citizen or resident alien, then you are required to report your worldwide income on your federal income tax returns. If you are living abroad, however, then the first $87,600 in income is not taxed. If your salary will be less than that amount, then no taxes will need to be paid in the United States, but you still will be required to file an income tax return each year.

The IRS tax form to use to report your foreign source income is Form 2555.

Whether you are taxed while in Germany depends on the German tax rules and whether a tax treaty exists between the United States and Germany that excludes from German taxes the income you earn abroad.

Send your money management questions to memoney@advanstar.com
. Answers to our readers’ questions were provided by Lawrence B. Keller, CFP, CLU, ChFC, of Physician Financial Services in Woodbury, New York.