Client moved from Chile to Oregon in 2008. Qualfies for federal foreign income exclusion & since there isn't any income besides wages & SE, no double taxation. It seems OR allows a deduction for foreign tax paid regardless of whether you took a foreign tax credit or deduction on the federal. Is this allowed if you didn't take the credit because of the foreign income exclusion? reading the info on the OR website leads me to think its ok, & they do allow a deduction for federal taxes paid.
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Citizen or Resident
Joan, I can't even spel Oregun and as such won't be able to shed any light. But almost any jurisdiction differentiates between whether the taxpayer is a resident, non-resident, or even a citizen. Can you help with this info? Most likely it will make a difference in the answer you receive. -
Ok, here's more info
Oh thanks; was typing late at night...
Both spouses are part-year residents. They moved from Chile to OR in 2008. One spouse is a citizen, one is not, but has a green card as of June 2008, . It appears taking the election on the federal level to file joint is more beneficial than filing the noncitizen as dual status (where they would have to file separate), especially since they have student loan interest. any idea if they can deduct in OR taxes paid to Chile on wage income earned while residents of Chile?Comment
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I'm not sure I'm following the process, but if they moved to OR during the year they would file a Part-year resident return (Form 40P) and only report income and deductions for the portion of the year they were in OR. Anything before the date (or after leaving) would not be included on the OR return. I wouldn't think they would pay Chile tax for income earned after they left the country."A man that holds a cat by the tail learns something he can learn no other way." - Mark TwainComment
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That's the question; OR allows a deduction for federal income taxes paid and foreign income taxes paid, as long as the foreign taxes were not taken as an itemized deduction. this is what the OR website has to say:
Your foreign tax subtraction is the smallest of:
Your 2008 foreign tax, or
Your 2008 federal tax subtraction of $5,600 ($2,800 for married/RDP filing separately) reduced by the sum of the 2008 federal tax you are claiming plus any prior year federal tax paid in 2008, or
$3,000 ($1,500 if married/RDP filing separately).
Nothing is said about it having to be double taxed income, and this is the most in depth discussion I've found. OR calculates tax as though a full year resident and then prorates the tax based on the percentage of OR source income vs. federal income. the foreign & federal taxes are deducted after the percentage is calculated to arrive at OR taxable income which is used to calculate the tax to which the proration is done.
The federal deduction is not limited to the income only taxed by oregon which is why I think the foreign tax would be allowed in this case.Comment
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