fdx727pilot

As mentioned by me and Laker, you don't get a credit for income you excluded from US taxes ($13184 if HKG tax is 16%). Assuming that 16% and a $38000 HK tax bill, you have an income of around $238K. How do you owe no tax, if you only exclude $82400 for Foreign income, have around $16.9K of exemptions and deductions, can only get a credit of $25K or so for you HK tax bill? Looks like you are still paying tax on around $140K of income at a marginal rate of at least 25% and 33% on some of it, with only a $25K credit to offset it. Obviously, you will owe some taxes. I don't know your exact numbers, but I really doubt you will owe zero.

FDXLAG

Gee wouldn't be nice if ALPA had some accountants to give us actual examples. He!! I would take FEDEX examples. But for some reason I can't find them. No Due Diligence. Vote NO

fdx727pilot

Except (I'm assuming you are an SFS guy) you have never delt with the foreign tax credit, as you have not been paying foreign tax. If you take away $13184 ($82400 x 16%) from each of you examples, and Fedex no longer profits. That doesn't even look at gross-up, where FDX has to give you approximately $1.19 for every dollar of your HK tax bill, because the payment itself is taxable, and at 16%, you need $1.19 to get an after-tax dollar.

I'm not saying that Fedex won't possibly profit on some pilots, but the whole deal is a lot more complicated than it looks, and is not strictly a cash cow for Fred.

Underdog

First, my income was about $225K. I have almost $50,000 in deductions. As a side note, I believe the foreign earned income exclusion will be $85,000 by the time somebody files from HKG.

iarapilot

You are correct; I am a Subic guy. And, I have never dealt with the foreign tax credit, because the PI doesnt get any taxes from me. But, I do know that for me, if I bid HKG with the FDA, I would not be better off....actually, much worse. I am better with the CBA as it stands now. Though that is only one aspect of this LOA that I think really stinks.

As I said, this was emailed to me from a crew member. I am not sure of the accuracy, but I know it is ballpark. I put it up FYI, and everyone is free to pick it apart.

Underdog

Now let's look at this equalization again. We don't get the foreign earned income exclusion, but it's there after PW does our taxes. Even though we're not required by the IRS, we pay taxes, "as though we live in the states." The IRS doesn't collect but we pay. There's a write-off for the foreign taxes paid. PW will file that write-off and receive credit for it. Again we don't receive. All of these "monies" go into the proverbial "stay at home('Hypothetical') income" kitty. And, based on the info the company put out regarding tax equalization, the pilot may have to pay state taxes as well. That being "determined under the laws of the tax jurisdiction the overseas employee was relocated from." Currently, for SFS, that would be where your household goods were shipped from.

So how much money is in fact in that "hypothetical income kitty?" It will differ from one individual to the next. Suffice it to say, tens of thousands of dollars! I claim, roughly $60,000 for a Captain. So now the company's going to pay my $38000 in HKG taxes and they're going to "give" me $2700 a month or $32,400 in housing allowance. Okay, they're providing $70,400 per year for me. However, I'm paying the bulk of this!

There's no wonder there hasn't been much discussion or follow-up on this by the company. It's huge for them. Can you imagine them coming out and saying, "well folks, we promised Hong Kong and France that we'd pay taxes for all pilots based there. It's a little pricey, so we're gonna take $40000-$60000 of yer money. But don't worry none ya here, cause we're gonna pay all yer foreign taxes and we'll even kick in a housing allowance."

...brilliant

FDXLAG

That $32,400 should not be brought into the discussion. There are no US taxes owed on this $32,400. It is completely deductible under the foreign Income Exclusion Housing Deduction, that is why the company is insisting that you verify the $2700. Any money the company gives you for housing expenses is deductible up about 100K in HKG and 70k in CDG.

iarapilot

FYI.......


For U.S. expatriates living in Hong Kong, the maximum housing cost amount a qualified individual may exclude from income is US$101,116.

http://www.pwchk.com/home/eng/globalwatch_oct2006.html

fdx727pilot

$50000 in deductions make you somewhat of a special case, so your situation may not be applicable to anyone else. In such a case, you shouldn't bid HKG. Although, with that big a deduction, Fedex and PW may be paying big in your case, as your "assumed tax" would be very low.

On the $85K, I can only use the numbers that exist, not assume they will change. They will probably change, but to what, who knows?

FDXLAG

Just to clarify, I believe that only money given to you for housing expenses is eligible for this deduction.