Saturday, January 25, 2014

Green Card Holders’ Tax Liability Levied on Foreign Income

Many permanent resident-wanna-be scratch their head because they are afraid of paying tax for income and property overseas. Whereas immigration is a rather complicated life decision and cautions should be taken, since so many express their worries and concerns over this topic,  for what is worth, we would like to explore the real damage here. 

United States is one of two countries in the world that impose tax on foreign income of permanent resident. However, it took possibility of double taxation into consideration. That is to say,  if you paid or accrued foreign taxes to a foreign country on foreign source income and are subject to U.S. tax on the same income, you may be able to take either a credit or an itemized deduction for those taxes. 

What is a Tax Credit?
The foreign tax credit is intended to reduce the double tax burden that would otherwise arise when foreign source income is taxed by both the United States and the foreign country from which the income is derived. Tax credits directly reduce a person’s tax liability. 
What is itemized deduction?
Tax deductions reduce taxable income; their value thus depends on the taxpayer’s marginal tax rate, which rises with income.
What is Tax Exemption?
Certain types of income as nontaxable. There are many types of income that qualify under this rule, such as life insurance death benefit proceeds, child support, welfare and municipal bond income.

Therefore,, it is safe to say, under US Taxation Law , chance that permanent resident will be double taxed is minimum. Many concerns are not necessary.