tax planner & foreign exclusion & qualified dividends

[joanmcq]

Ok, I'm trying to do a 2010 projection in ATX using the tax planner and it is showing no tax whatsoever for 2010, even if I use the 2009 figures, where there was $791 due. Situation is: ex-pat with wages that qualify fully for the income exclusion, rest of income is qualified dividends. Also has a kid qualifying for the CTC. So....I have some of income taxed at 0% due to the cap gains rate (wages are low enough that a lot of the dividends are taxed at zero), wages at zero, but the amount of dividends that are taxed are at the rate as though the wages were taxed. (Insert "I hate the tax code, even if it is my livilihood" here-try explaining this crap to a Brit). So if nothing changes but $50 more of a standard deduction, why is the planner showing no tax? The question is how much can he draw in dividends to pay no US tax. But the answer should be less than last year, not more....

A. Per the Tax Guide I got today, the rates haven't changed

B. The zero rate is still in effect

C. Nothing else has changed.

So my conclusion is: the software is on drugs.

If anyone would like to try this at home, the figures are:

Wages & foreign exclusion: $23486

Dividends so far are: $30521

One child under 17

Filing HOH.

Standard deduction.

I think I'll try to run this on Drake tomorrow, but I thought I'd try y'all first.

[Kea]

As far as I know (limited, at best), the interest (and any other non-wage income) is taxed at the rate as if the wages were taxed & that is true for 2009 & 2010. I know we discussed the re-calculation needed for interest with foreign income exclusion in the tax update class a couple of weeks ago. No mention was made of this changing.

Hope that helps.

[joanmcq]

That much I know; ex-pats aren't big voters and no-one but tax people commented on that one in the first place. But I'm trying to get the guy an amount he can take out by year end and not have to pay US tax, and I can tell him another 10K is cool, but not much more than that.

And, of course, currency conversion rates come into the mix too. I can't do the calc by hand...the currency stuff I can manange; capital gains calcs with the exclusion, I can't.