United States citizens working abroad appear assured of major new tax advantages no matter which version of the tax bills now moving through Congress finally is enacted.
Arguing that U.S. corporations are hiring foreigners in their multinational operations instead of sending American citizens overseas, Democrats and Republicans are in basic agreement on provisions that will allow a $75,000 exemption on income earned outside U.S. borders.
In addition, taxpayers working abroad will get a significant increase in deductions for their housing expenses. The total value of these tax breaks is reflected in the estimated revenue losses: In 1982, the Democratic Ways and Means Committee bill, which appears likely to set the standard for the new exemption, would cost the Treasury $299 million; by 1986, this would grow to $789 million.
Under the terms of the committee bill, anyone living in a foreign country for 330 days out of the year (instead of the current requirement of 510 days out of an 18-month period) will be eligible for an income exemption of up to $75,000. Present law determines the tax deduction according to a complex formula in which actual costs of living abroad are compared with the cost of living in the more expensive sections of the United States.
Along with the straight exemption, citizens working abroad would get a liberalized housing allowance under the legislation. Housing costs above a current base level of $6,059 (a figure based on 16 percent of the salary of a GS14 federal worker) could be excluded from taxable income. If the taxpayers is living under "adverse conditions" and has to house his family in a second home, these costs also can be added to the exclusion.
The basic $75,000 exclusion will, according to the terms of the Democratic bill, grow by $5,000 a year for four years, until it reaches a ceiling of $95,000. These provisions have been absorbed in their entirety by the Reagan administration House substitute, and consequently the benefits are almost guaranteed to remain intact through the process to final enactment.
The Senate bill is slightly less beneficial to persons working overseas, but a House-Senate conference committee is all but sure to agree to the House provisions since they have been agreed upon by both parties.