r2i forum

Hi -

I am new to this forum and apologize if my questions have already been answered somewhere else (I searched but did not find all the info I needed). Can someone please help me with the followings?

I am on H1B visa working in USA for last 6 years and am planning to relocate to india over the summer (May-June 2010) and I have few questions around the tax implications I would have from my relocation:

facts:
1. I have 3 dependents (Wife is India citizen and has no income, 2 children (4 and 1) who are US citizens)
2. my estimated income till june 2010 is around $50,000
3. my estimated income from my india salary for the later part of the year will be $20,000
4. My company is going to pay $30,000 in relocation asistance.
5. No other income

Questions:
1. if I relocate only after spending more than 183 days in 2010 in USA, will that make me eligible to file 1040 claiming all the standard deductions, exemption and child tax credit? I believe this option will result in bigger tax return. is that right?
2. also, under 1040, will I be able to claim foreign tax credit for my india income?
3. otherwise if I have to file dual tax, what exemptions/deductions/credits can I claim based on the fact that I am from India?
4. will # of days of my stay in US in 2010 have any impact on my tax return?

Thanks,
Vipin

Attention #1 Vipin gupt

Q 1. if I relocate only after spending more than 183 days in 2010 in USA, will that make me eligible to file 1040 claiming all the standard deductions, exemption and child tax credit? I believe this option will result in bigger tax return. is that right?
A 1. Yes, most likely. The 183 days calculation relates to "Substantial Presence Test" that IRS uses to determine eligibility. The calculation is not on a calendar year basis but a three year composite determined as: Days in the filing year (minm 31) + 1/3 of days in the previous year + 1/6 of days in the year before the previous year.

Q 2. also, under 1040, will I be able to claim foreign tax credit for my india income?
A 1. Yes. It may not turn out to be a one for one deal. Details can be found in Form 1116

Q 3. otherwise if I have to file dual tax, what exemptions/deductions/credits can I claim based on the fact that I am from India?
A 3. I presume you mean "Dual Status Taxpayer" per US IRS. In such a case, you would be filing a 1040-NR ~ no standard deduction- only one exemption - itemized deduction is allowed. Indian income is excluded. Unless you are in the research/teaching profession “the fact that I am from India” has no impact.
Q 4. will # of days of my stay in US in 2010 have any impact on my tax return?
Yes. A minimum of 31 days is needed. See A 1.

bmukherji - Appreciate your detailed response. Thank you!!!!!