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What is the filing threshold in Saudi Arabia?

If you’re earning something like $50,000 to $70,000 in Saudi Arabia, you might be scratching your head about your tax situation with the IRS. It’s a bit of a puzzle, really, because it hinges on a few things like where you’re living and what kind of income you’re making.

What counts for tax when living abroad and earning?

When you’re living outside the US and earning your keep in Saudi, two big questions pop up:

  • Where’s Your Income Coming From? If you’re earning for work done outside the US, that’s a key point.
  • How Long Have You Been Abroad? Spending at least 330 days out of a 12-month period in Saudi? That’s important for tax reasons.

Tick these boxes, and you could tap into something called the foreign earned income exclusion. For 2023, this could let you exclude up to $120,000 of your income from US taxes. So, if your only income is what you earn and it’s under this limit, you might not owe the IRS a dime.

Additionally, let’s say you’re making around $60,000 and you’ve been chilling in Saudi for over 330 days. This setup could mean you can wave goodbye to US taxes on that income.

Does the exclusion limit increase?

Yes, of course! The foreign-earned income exclusion isn’t set in stone. It inches up a bit each year to keep up with inflation. This tweak means you might exclude a bit more income each year.

What can I do when my income is over the exclusion limit?

What if you’re doing really well and raking in, say, $150,000? After you exclude $120,000, you’ve still got $30,000 hanging out there. Here’s where you can look at housing expenses. Things like your rent, utilities, and even that Wi-Fi bill in Saudi might help lower your taxable income.

Is there a limit on housing deductions?

In places like Riyadh, the IRS says you can only deduct up to $40,000 for housing. So, if your housing costs are soaring above this, you can only claim up to this ceiling on your US taxes.

As we roll into 2023, be aware that these deduction limits aren’t set in stone. The IRS tweaks them now and then, reflecting changes in living costs and inflation around the globe. So, if you’re living in a pricier city, you might find the cap on your housing deductions a bit more generous to match those higher expenses.

Also, let’s not forget that housing deductions cover more than just your rent. We’re talking about a range of costs like utilities (but not your phone bills), insurance for your personal stuff, leasing fees, renting furniture, and even some repair and maintenance costs. 

There’s more good news. You can also use the standard deduction. For 2022, if you’re filing solo, that’s $12,950 off your taxable income.

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