My husband is a military contractor overseas. He is tax exempt from a large portion of his income if he is out of the United States for so many days of the years. My question is if he was to fly into US in the morning and then get on a cruise ship later that day is he considered not being in the United States for the duration of the cruise? Of course we would not choose a ship visiting US ports and if they did he would stay on board. I have asked a tax advisor and they were lost even more than I am.
Any help would be greatly appreciated. We want a family vacation on his time off but really want to keep the exempt status.
Foreign flagged cruise ships are considered foreign soil. I am not an accountant or IRS auditor, so I cannot tell you how your situation will be affected, but I am sure that most cruise ships are foreign soil.
The exceptions would be NCL America, Delta Queen and a few other small cruise lines. These are U.S.-flagged vessels.
<> Well, we do try anyway. Paul is correct in that the ships are techincally 'foreign soil' so he will be out of the country while on the ship unless it is in the USVI or PR but he will also be entering the USA when he gets onboard and again when he gets off the ship. I don't know how that works and that is something you need to discuss with a CPA or something if he is allowed to enter numerous times or must stay out continously. The one other thing that may be of interest as far as tax goes is that if an American works onboard the ship they are required and obligated to pay taxes in the USA.
Thanks so much for your insight and answers. I really want to depart out of Florida since we live here and it's just too hard to fly with two young children. I'm close to booking as soon as he has approval on his R&R dates!!!
Jim Bragg... good point about the USVI. Puerto Rico and St Thomas are both in the USA. However, as territories they have a different taxable status than us mainlanders - not that that would change this person's situation any.
Anyway - it's all speculation. As Jim said, the NUMBER of times you enter the US per year might also have an effect.
American Citizens who work on International ships are liable for income taxes ONLY if they are also US Residents. Those of us who reside outside the USA - but hold US Passports - are not liable for our first US$82,000 of annual income. Filing jointly with my wife gives me a US$164,000 annual deduction.
Article 911 of the US Tax Code says that if my Primary Residence is outside the USA for at least 335 days per year, I can enter the USA as many times as I like - and stay there as long as I want - without paying taxes (so long as I am not working in the USA). The fact that my international flag (Bahamas) employer (a cruise ship) happens to enter US waters in Florida a few times a week has no bearing on my tax status.
The poster's husband should be most concerned about where his permanent residence is located - in the eyes of the IRS.
In most cases regarding taxable issues (in most countries) the port of embarcation for the cruise usually determines which country has tax jurisdiction. This became quite a hot issue when Residensea was starting up. There was speculation that one ecould establish an offshore tax haven on the ship. It turned out not to be the case. Port of Embarcation rules determined that tax liability went to the country where the ship first departed, or where the company owner first boarded the ship.
Borderline situation. It could be construed either way - it could be said that he was just in the US as a mid-point in transferring from out of the US to out of the US, so the day in the US could be taken as an out of US day as well as the days on the ship - if out of the US. The IRS would probably concede this if he were ernest in reporting his other days if it ever come to a review situation. In any event, if it is that important to you, claim those days as out of US days.
Technically, good challenging question.
In my opinion, if that tax money is that important to you - stay out of the country - not worth the concern!!! WOW!!