No local income tax means no foreign tax credit. Above the exclusion, the US taxes it all.
In the Gulf there is usually no treaty, no totalization agreement and no local income tax to credit. The exclusion covers $130,000 for tax year 2025; above that the marginal dollar is taxed at US rates. The housing exclusion and the timing of your move decide the number.
The three things a high-income expat return gets wrong
The housing exclusion is left unclaimed
Rent in Dubai, Doha or Kuwait City is high, and qualified housing expenses above 16% of the exclusion come out of the tax base. Unclaimed, it is the largest single item lost.
A bonus lands in the wrong year
A completion bonus paid after you leave can be foreign earned income of the year it was earned — or fully taxable US income. The paperwork decides which.
State residency is never cut
A licence, a voter registration and a house that has never been let can keep a high-tax state filing right open years after you left.
A worked example, tax year 2025
A single engineer in the United Arab Emirates, full year abroad, renting privately.
Questions professionals abroad ask
I pay no local income tax. Does that make my US return simpler?
It makes it more expensive. With no host-country tax there is no foreign tax credit to fall back on, so every dollar above the exclusion — $130,000 for tax year 2025 — is taxed at US rates with nothing behind it.
How much rent can the housing exclusion actually remove?
Qualified housing expenses above 16% of the exclusion, capped at 30% of the exclusion unless your city is a designated higher-cost locality. On Gulf rents that is usually the largest single item on the return.
My completion bonus was paid after I left. Which year does it belong to?
It can be foreign earned income of the year it was earned, or fully taxable US income. The contract wording and the payment date decide it, which is why it is worth asking before the bonus is paid.
I have not lived in my old state for years. Do I still file there?
Possibly. A driving licence, a voter registration and a house that has never been let can keep a filing obligation open long after you left. One state is included in the $599; each additional state is $89.
Am I a Complete Return or a Complex Return?
Employment income in one country is usually the $599 Complete Return. Self-employment, rental property, investment income, dual-status or two countries in one year moves it to the $995 Complex Return.
Bring your contract and your travel dates.
Salary, housing, any bonus still to be paid, and the states you have left behind. Twenty minutes settles what the return should look like.