Taxes Made Simple

A reader asks: For all of 2009, I will be living and working abroad, and I will earn roughly $150k. I understand that about $88k will be tax exempt. My question is regarding the rest of that money. How will it be taxed?

I have been told that i will pay taxes on the remaining $62k at $150k tax bracket. But I'm not sure how exactly I'd go about calculating that. Any information you can give me will be appreciated.

My answer: Take a look at the worksheet on page 37 of the instructions to Form 1040. Essentially, you calculate your tax on the entire amount (150k), then you subtract what the tax would have been on the excluded amount.

In your case, I believe it should work out that the amount above the exclusion will simply end up taxed at 28%.

Want to learn more about taxes? Take a look at my recent book, Taxes Made Simple: Income Taxes Explained in 100 Pages or Less.