I took voluntary redundancy from my job in Australia. Part was taxed and part was exempt. How do I have to handle on my US return?

Forum|Forum|4 years ago
February 23, 2022
7 replies
76 views

Payout included unused leave as well as longevity pay.

TurboTax Premier Online

ThomasM125

Level 15

If you are a US resident, you have to pay tax on all income earned worldwide. However, you may be entitled to a foreign earned income credit if you were away for a year or more, or were a bona fide resident of a foreign country. You can visit the Foreign Earned Income and Exclusion section in TurboTax, under Less Common Income in the Income and Expenses section to see if you qualify. You will also see options on how to report your foreign income there.

I'm not sure what you mean when you say part of the income was exempt from tax, you would have to let us know more about why it was exempt for us to help you with it.

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shansmwAuthor

Level 4

A large portion of the payout was marked by my employer as non-taxable.

Then they show the tax paid on the rest of it.

I guess my question involves, since this is a voluntary redundancy, with payment for years in service, long-service leave, sick and vacation leave not taken (and also superannuation paid), it turns out to be more than my usual annual income. I assume that even though Oz isn't taxing a portion, that the US will be taxing it all anyway. The only credit I get is the tax paid to Oz, and the only income that is taxable in US now is the amount that exceeds the Oz/US treaty limit.

I have never taken a housing exemption before because my income was always within the the treaty limit so it wasn't necessary to add more info. For 2021, though, would that be appropriate? (I may be conflating that with homeowner expenses that should be listed in itemized deductions.)

Or, do I just use my Oz mortgage and normal housing expenses that are deductible in the US to lower my tax liability? (something I never had to do before either because of my income level).

Thanks much for any insight.

DaveF1006

Level 15

To clarify? Are you trying to claim the foreign income exclusion? If so, the following Turbo Tax link posted by Turbo Tax expert GiseleD lists these expenses that can reported as housing expenses.

Housing expenses include:

•Rent,

•The fair rental value of housing provided in kind by the employer,

•Repairs,

•Utilities (other than telephone charges),

•Real and personal property insurance,

•Nondeductible occupancy taxes,

•Nonrefundable fees for securing a leasehold,

•Rental of furniture and accessories, and

•Residential parking.

Housing expenses do not include:

•Expenses that are lavish or extravagant under the circumstances,

•Deductible interest and taxes (including deductible interest and taxes of a tenant-stockholder in a cooperative housing corporation),

•The cost of buying property, including principal payments on a mortgage,

•The cost of domestic labor (maids, gardeners, etc.),

•Pay television subscriptions,

Improvements and other expenses that increase the value or appreciably prolong the life of property,

•Purchased furniture or accessories, or

•Depreciation or amortization of property or imp

As you mentioned, your mortgage interest and real estate tax are not allowable expenses but these can be reported as itemized deductions in your return.

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