Living Outside the U.S.? You May Be Able to Exclude Foreign Earned Income On Your Tax Return

If you are a U.S. citizen or resident alien of the United States residing and working outside the U.S. you should be concerned about the taxes implications.  The country you are living in may want to tax that income and in the U.S. you are required to report all your worldwide income so you could face double taxation on that income.  The U.S. however has some provisions that are meant to protect you from the double taxation.  One of which is the Foreign Earned Income Exclusion.

The Foreign Earned Income Exclusion allows you, if you meet the requirements, to exclude up to a certain amount of foreign earned income.  First of all, realize this exclusion is just for foreign earned income which means income that you earn by working as an employee or in your business while in a foreign country.  This does not include unearned income like investment or passive income even if you are living in another country.

To qualify you must have foreign earned income, your tax home must be in a foreign country, and you must meet one of the following requirements:

  • You must be a U.S. citizen who is a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax year.
  • Or you are a resident alien who is a citizen or national of a country with which the U.S. has an income tax treaty in effect and who is a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax year.
  • A U.S. citizen or a U.S. resident alien who is physically present in a foreign country or countries for at least 330 full days during any of 12 consecutive months.

The amount of the exclusion is adjusted annually for inflation.  For 2018 the amount is $104,100 per person. In addition, you can exclude or deduct certain foreign housing amounts.  The exclusion amount limit applies to the foreign earned income and the foreign housing combined.  Each qualifying person can exclude up to the limit but if one spouse is below the limit the other spouse does get to use the other spouse's unused amount.

You may also be entitled to exclude from income the value of meals and lodging provided to you by your employer.

This is a complex tax matter that I would be happy to assist you with.  It is important to prepare to take the exclusion and know what to expect and how to benefit.  There are some complicated timing issues I can help you with, so feel free to email me at to schedule a meeting to discuss your situation. Remember, while taxes and business are complicated, I have been through numerous times and I can help you. So contact me today.

Jeff Haywood, CPA
The CPA Superhero

The above information is general information and is not all inclusive and as always in your tax situation everything "depends on facts and circumstances." So call me to talk about your specific facts and circumstances.

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