Israeli Residents Who Are U.S. Citizens: How Work Days in the U.S. May Affect Your Foreign Tax Credit

Israeli Residents Who Are U.S. Citizens: How Work Days in the U.S. May Affect Your Foreign Tax Credit

Israeli residents who are also U.S. citizens are generally required to report their income in the United States, even if they live and work in Israel. When all work is performed in Israel, calculating the Foreign Tax Credit on the U.S. tax return is usually relatively straightforward.

But what happens when some working days are spent in the United States?

Business trips to the U.S., or work performed from there, during part of the year, may affect the calculation of the Foreign Tax Credit in the U.S.

The outcome depends on several factors, including the number of days spent in the U.S., the identity of your employer, and which entity ultimately bears your employment cost. The calculation is based in Israeli and U.S. domestic tax law, as well as the tax treaty between the two countries.

in certain circumstances, the proper application of the treaty provisions may allow for a more efficient calculation of the U.S. Foreign Tax Credit for taxes paid in Israel and help prevent double taxation.

If you worked in the U.S. during part of the year, we recommend reviewing how the Foreign Tax Credit was calculated on your U.S. tax return.

We invite you to contact us to assess how this issue may affect your U.S. tax return.