CandleFocus Glossary Editor
Under the provisions of the foreign earned income exclusion, you can avoid double taxation of your wages, salaries, and self-employment income earned outside of the U.S. This exclusion allows you to exclude up to $107,600 of foreign earned income from 2020 federal income tax (if you are married and filing jointly, you can exclude up to $215,200). It also allows you to exclude the foreign housing amount and a foreign housing deduction.
To qualify for the foreign earned income exclusion, you must meet certain requirements. First, you must be a U.S. citizen or resident alien and have both a valid passport and Social Security number. Second, you must have a “tax home” in a foreign country, and earn foreign earned income. Third, you must be an “individual taxpayer”, which is an individual filing an individual income tax return. Fourth, you must meet either the “bona fide residence test” or the “physical presence test” for a minimum of 330 days during a 12 month period for the year for which you are claiming the foreign earned income exclusion.
The foreign earned income exclusion has some limits and restrictions. For example, you cannot claim the exclusion for income earned from an employer in the United States, or from a United States source that is not effectively connected to your foreign business or profession. However, you may be able to claim the exclusion for income earned from a foreign employer.
In addition to the foreign earned income exclusion, you may be eligible to claim other U.S. tax benefits, such as a foreign housing deduction or a foreign housing exclusion. A foreign housing deduction allows you to deduct certain housing costs you incurred abroad and a foreign housing exclusion allows you to exclude a portion of your foreign housing amount from your income and from taxes.
It's important to be aware of the potential tax liabilities associated with being an expat, as well as the various exclusion and exclusion rules. The foreign earned income exclusion can significantly reduce your U.S. tax liability if you qualify, but the laws and regulations can be complex and confusing. Before claiming the exclusion, you should consult a qualified tax professional who can answer your questions and help you determine your eligibility. With careful planning and the right advice, you can make the most of your years overseas and save on U.S. taxes at the same time.
To qualify for the foreign earned income exclusion, you must meet certain requirements. First, you must be a U.S. citizen or resident alien and have both a valid passport and Social Security number. Second, you must have a “tax home” in a foreign country, and earn foreign earned income. Third, you must be an “individual taxpayer”, which is an individual filing an individual income tax return. Fourth, you must meet either the “bona fide residence test” or the “physical presence test” for a minimum of 330 days during a 12 month period for the year for which you are claiming the foreign earned income exclusion.
The foreign earned income exclusion has some limits and restrictions. For example, you cannot claim the exclusion for income earned from an employer in the United States, or from a United States source that is not effectively connected to your foreign business or profession. However, you may be able to claim the exclusion for income earned from a foreign employer.
In addition to the foreign earned income exclusion, you may be eligible to claim other U.S. tax benefits, such as a foreign housing deduction or a foreign housing exclusion. A foreign housing deduction allows you to deduct certain housing costs you incurred abroad and a foreign housing exclusion allows you to exclude a portion of your foreign housing amount from your income and from taxes.
It's important to be aware of the potential tax liabilities associated with being an expat, as well as the various exclusion and exclusion rules. The foreign earned income exclusion can significantly reduce your U.S. tax liability if you qualify, but the laws and regulations can be complex and confusing. Before claiming the exclusion, you should consult a qualified tax professional who can answer your questions and help you determine your eligibility. With careful planning and the right advice, you can make the most of your years overseas and save on U.S. taxes at the same time.