Thursday, June 08, 2006

Give to Caesar what is Caesar's
And to God what is God's (Matthew 22:21).

Though I do not know any missionary, family or single person, who makes $80,000.00 a year, I feel impelled to pass on the following information concerning a new tax law signed by President Bush on May 17th, 2006. The law is retroactive to January 1. I learned about the law through the newsletter for HR personnel Expatica HR.

New tax ruling hits US expats
The US government has passed a tax law which will increase the tax expat workers from the US will pay. The law will affect tax retroactively and HR departments will need to increase tax withholdings for their expats or risk being fined for not paying enough estimated tax (Expatica HR).

I found the law on the internet and I have placed the text of the law that might affect foreign missionaries below:

Foreign Earned Income Exclusion and Housing Exclusion

Current law, TheTaxBook™ 2005 Edition, page 14-9: A taxpayer may be able to exclude from taxation up to $80,000 of foreign earned income. A taxpayer may also be able to either deduct a portion of housing expenses from income or treat a limited amount of income used for housing expenses as not taxable by the United States [IRC §911]. To qualify for either the exclusion or deduction, the taxpayer must have a tax home in a foreign country and earned income from personal services performed in the foreign country. The exclusion or deduction is reported on Form 2555, Foreign Earned Income.

The $80,000 is adjusted for inflation beginning in 2008 by using the cost-of-living adjustment determined under Section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting “2006” for “1992” in Section 1(f)(3)(B).

New law, IRC §911: The new law includes the following reforms:

- The $80,000 is adjusted for inflation beginning in 2006 and the cost-of-living adjustment under Section 1(f)(3) is determined by substituting “2004” for “1992” in Section 1(f)(3)(B). Thus, the $80,000 is adjusted to $82,400 for 2006.

- The employer-provided housing exclusion is tied to the foreign earned income exclusion cap. The base housing amount used in calculating the foreign housing cost exclusion in a taxable year is 16% of the amount (computed on a daily basis) of the foreign earned income exclusion limitation (instead of the present law 16% of the grade GS-14, step 1 amount), multiplied by the number of days of foreign residence or presence in that year.

- An objective standard is applied in determining the amount of reasonable housing expenses. The amount of the exclusion is limited to 30% of the maximum amount of a taxpayer’s foreign earned income exclusion. Thus, the maximum amount of the foreign housing cost exclusion in 2006 is $11,536 [($82,400 X 30%) minus ($82,400 X 16%)].

- A stacking rule is applied to ensure that citizens living and working abroad are subject to the same U.S. tax rates as individuals living and working in the U.S. Thus, any income in excess of the exclusion amount is taxed by applying to that income the tax rates that would have been applicable had the individual not taken the foreign earned income exclusion or housing exclusion. For example, a single individual with $82,400 of foreign earned income in 2006 that is excluded under Section 911, and $20,000 in other taxable income after deductions, is subject to tax at the marginal rate of 28% on the $20,000 of excess income.

These new rules are effective for taxable years beginning after December 31, 2005.

I will close today's edition with something something from N.T. Wright's book, Simply Christian.
This brings us to the first of two golden rules at the heart of spirituality. You become what you worship. When you gaze in awe, admiration, and wonder at something or someone, you begin to take on something of the character of the object of your worship. Those who worship money become, eventually, human calculating machines. Those who worship sex become obsessed with their own attractiveness or prowess. Those who worship power become more and more ruthless.
So what happens when you worship the creator God whose plan to rescue the world and put to rights has been accomplished by the Lamb who was slain? The answer comes in the second golden rule: because you were made in God's image, worship makes you more truly human. When you gaze in love and gratitude at the God whose image you were made, you do indeed grow. You discover more of what it means to be fully alive (p. 148).

Love's prayers,