tax exclusion benefits

by Bobby
(Huntsville AL)

Can you tell me what the rules are for tax exclusons in Iraq and Afghanistan for contractors? I have heard different stories, and I have also heard the rules have changed a bit over the years. Is all or a prtion of the income made in a war zone taxable?

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tax exclusion benefits

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Jan 17, 2010
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starstarstarstarstar 		Tax Law
by: Doc

After 2 1/2 years of working in Iraq I learned 1 thing about the tax laws: NOBODY understands them.
To be on the safe side this is what we did;
The law requires you to be OUTSIDE the boundries of the United States for 335 days out of 1 year, we would stay out of the United States for 340 days to be safe. Now, out of the time you did spend in the United States, you could break it up, like spend 2 weeks for Christmas, then spend a week for Labor day.
The time you spent in another country meant you were tax free (Depending on the Company) up to $87,000. After you hit $87,000 you had to pay tax's like usual for everythging OVER $87,000, BUT not the previous $87,000. Let's pretend you made $97,000, as far as the Government was concerned, you only made $10,000 in taxable income, so it wasn't all that much to worry about. HOWEVER, if you came home in less than 335 days (It could be only 330 days, I never pushed it) you would have to pay taxes on ALL of the money you made. You see the sweet spot is $87,000 for 335 days and zero tax. Lets say you get fired at 328 days, spend a week in Dubai, see the sites, then fly home.... Problem solved.

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