Hello all,
I'm planning on hiring an accounting when we get to Spain later in the year. For now, I'm trying to figure out some tax questions for the sake of work contract negotiations.
We're US citizens moving to Spain. My wife is a Spanish citizen and we'll have residency. For now anyway, we'll work remotely for US companies (paid in the US). The following numbers are inaccurately rounded for simpler math.
Year 1 living in Spain
We earn 100K Euros
We pay 20K Euros to the US IRS
Separately Spain says we owe 30K Euros on the same Income
Spain gives us a credit of 20K Euros paid to the US and charges us the difference of 10K Euros
Net taxes paid 30K Euros
Year 2 living in Spain
We earn 100K Euros
We take the US foreign tax (deduction) of 10K Euros (the amount paid to Spain on the prior taxes)
We pay the IRS 17k Euros based on the reduced 90K in earnings
Separately Spain says we owe 25K on the same 90K income
Spain gives us a credit of 17K paid to the US and charges us the difference of 8K Euros
Net taxes paid 25K Euros
2 Questions:
1) Is this scenario accurate?
2) It seems that taking the foreign tax credit instead of the deduction wouldn't really get us ahead because that would just reduce our tax paid to the US and thereby increase by the same amount taxes paid to Spain.
I'm just looking for general guidelines here. Later an Accountant will be required. Thanks for your insights!
I'm planning on hiring an accounting when we get to Spain later in the year. For now, I'm trying to figure out some tax questions for the sake of work contract negotiations.
We're US citizens moving to Spain. My wife is a Spanish citizen and we'll have residency. For now anyway, we'll work remotely for US companies (paid in the US). The following numbers are inaccurately rounded for simpler math.
Year 1 living in Spain
We earn 100K Euros
We pay 20K Euros to the US IRS
Separately Spain says we owe 30K Euros on the same Income
Spain gives us a credit of 20K Euros paid to the US and charges us the difference of 10K Euros
Net taxes paid 30K Euros
Year 2 living in Spain
We earn 100K Euros
We take the US foreign tax (deduction) of 10K Euros (the amount paid to Spain on the prior taxes)
We pay the IRS 17k Euros based on the reduced 90K in earnings
Separately Spain says we owe 25K on the same 90K income
Spain gives us a credit of 17K paid to the US and charges us the difference of 8K Euros
Net taxes paid 25K Euros
2 Questions:
1) Is this scenario accurate?
2) It seems that taking the foreign tax credit instead of the deduction wouldn't really get us ahead because that would just reduce our tax paid to the US and thereby increase by the same amount taxes paid to Spain.
I'm just looking for general guidelines here. Later an Accountant will be required. Thanks for your insights!
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