I basically understand the Foreign Exemption deal. Say you are applying to Dyn and the salary is $134K. Roughly the first $85k is tax deductible, what about the remaining $49k? Can anything be deducted from that such as laptop, gear, medical expenses over what is reimbursed....... Or is that $49k just hit full boar by the IRS? Not sure if my tax guy knows his on this and I want to be prepared. Tks

If you have enough to itemize, especially as a 10-99 contractor, you'll be able to deduct one of two ways.

1. Actual cost, one time, one year.
2. Depreciated value, over a period of time.


Your 85 or 85K is a deduction, just like a kid is. It simply adjusts your taxable income.

Some items that have dual purposes, like claiiming a gps when you can use it for hunting/recreation, will be flagged.

I just got hit with a variance and I'm certain my CPA is clueless on the foreign earned income, looks like I've paid taxes twice on the same earnings.

I am in search of a new CPA now.

The key point to remember and remind your tax person of is that you are a Consultant and Independant Contractor. Before leaving home, set up your self-employed business by whatever standards are required for your state. In Califonia, I only had to file a ficticious business statement in the local newspaper announcing my business (PAR & Associates Consulting).
Originally, I purchased and wrote off all the office furniture, computer, printer, fax and other officer stuff. Anything related to your business is now a business expense and can be written off against your business income. I don't take the home office deduction because IRS is pretty picky about that one. If you are overseas it is harder to justify. A big write off for me is my health insurance coverage. When I retired from the PD I was able to keep my insurance at the same cost that the city pays. For my wife and I it is about $1,200 a month for full medical and dental. That alone gives me an annual 14,400 write off. Another great business write off is a Self-Employed Retirement Plan (SEP). I rolled over a regular IRA into the SEP this year and made my first business contribution. You can contribute 20% of your net business income to the SEP. Bottom line is you get a great savings vehicle and a tax write off at the same time. I have a credit card in my name and the business and to help track expenses use it only for business related stuff. When making those long plane flights I prefer to upgrade to Business Class once on the plane. The airlines prefer a credit card. When buying supplies and support items at the local PX, yep out comes the credit card for a legal miscellaneous business expense. Not sure you could justify your R&R expenses in Paris, but hotel accomodations on your way home would qualify. Anyone flying out of Afghanistan via Dubai usually has a one or two night wait. The secret to success is keeping good records and putting a business summary of income and expenses together before sitting down with your tax person. I don't cheat and have receipts for everything in case IRS says, "show us." My tax guy loves it because it makes his job easier. If I can answer any other questions for anyone feel free to contact me off line at <Ltpar@aol.com.> Happy tax season to all.

Iraqtrainer2......Thank's that's great Info. Somehow though if I tried it I'd be the Guest star on ConAir2.

Iraqtrainer2 wrote:

The key point to remember and remind your tax person of is that you are a Consultant and Independant Contractor. Before leaving home, set up your self-employed business by whatever standards are required for your state. In Califonia, I only had to file a ficticious business statement in the local newspaper announcing my business (PAR & Associates Consulting). Originally, I purchased and wrote off all the office furniture, computer, printer, fax and other officer stuff. Anything related to your business is now a business expense and can be written off against your business income. I don't take the home office deduction because IRS is pretty picky about that one. If you are overseas it is harder to justify. A big write off for me is my health insurance coverage. When I retired from the PD I was able to keep my insurance at the same cost that the city pays. For my wife and I it is about $1,200 a month for full medical and dental. That alone gives me an annual 14,400 write off. Another great business write off is a Self-Employed Retirement Plan (SEP). I rolled over a regular IRA into the SEP this year and made my first business contribution. You can contribute 20% of your net business income to the SEP. Bottom line is you get a great savings vehicle and a tax write off at the same time. I have a credit card in my name and the business and to help track expenses use it only for business related stuff. When making those long plane flights I prefer to upgrade to Business Class once on the plane. The airlines prefer a credit card. When buying supplies and support items at the local PX, yep out comes the credit card for a legal miscellaneous business expense. Not sure you could justify your R&R expenses in Paris, but hotel accomodations on your way home would qualify. Anyone flying out of Afghanistan via Dubai usually has a one or two night wait. The secret to success is keeping good records and putting a business summary of income and expenses together before sitting down with your tax person. I don't cheat and have receipts for everything in case IRS says, "show us." My tax guy loves it because it makes his job easier. If I can answer any other questions for anyone feel free to contact me off line at <Ltpar@aol.com.> Happy tax season to all.

Excellent post..... Thanks

Finman wrote:

Roughly the first $85k is tax deductible.

In the past that statement was completely true... for 2006 it's formulated a different way.

Thanks for the info, but I think it comes down to paying the extra two hundred bucks to a qualified accountant, getting the most back and not having to worry for the next three to five years. Thanks for all the advice though.