Income Taxation of Academics Studying or Teaching Abroad
Dennis S. Karjala
Arizona State University College of Law
44 J. Legal Educ. 531 (1994)
When university professors or other educators teach or conduct research abroad, tax planning before and during the foreign visit can often result in substantial tax savings. The United States has tax treaties with most foreign countries providing that academics who study or teach abroad are exempt from income taxation in the host country. In seeking to reduce U.S. income tax liability, most academics who work overseas will be able to take advantage of one of two mutually exclusive tax benefits. The first is a deduction in calculating taxable income for away-from-home traveling expenses (including food and lodging) under section 162(a) of the Internal Revenue Code. The deduction is available for taxpayers whose tax home remains at the vicinity of their U.S. home institution. The other is an exclusion of foreign earned income from gross income under section 911 of the Code. The exclusion is available for taxpayers whose tax home has shifted to a foreign country and who meet certain other conditions, the most important of which is that they be physically present in a foreign country for at least 330 full days out of any consecutive twelve-month period.
Taxpayers eligible for the deduction are ineligible for the exclusion, and vice versa. The exclusion generally results in greater tax savings for persons who have significant foreign earned income (such as sabbatical salaries or foundation grants). The deduction may result in greater savings for taxpayers who have small amounts of foreign earned income, or substantial amounts of deductible traveling expenses. This article discusses the basic choices available to academics who work abroad while maintaining employment ties to a U.S. academic institution and explains how planning can optimize those choices.
Keywords: Tax Deduction, Foreign Visit Tax Planning, Academics
Number of Pages in PDF File: 17Accepted Paper Series
Date posted: September 6, 2009
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