Foreign Earned Income Exclusion

If you meet the requirements established by the internal revenue service for a given tax year you will be able to deduct some or all of the income you have earned outside of.

Foreign earned income exclusion. Before you jump on board with claiming the feie there are a few big things you should know. In 2017 it was 102 100. Below are the maximum amounts for foreign income tax exclusion since the 2006 tax year adjusted for inflation. This means if you have dividends interest or capital gains they cannot be claimed on the feie.

The foreign earned income exclusion the foreign housing exclusion and the foreign housing deduction are based on foreign earned income. The foreign earned income exclusion is the largest tax advantage available to you as an expat. If you meet certain requirements you may qualify for the foreign earned income exclusion the foreign housing exclusion and or the foreign housing deduction to claim these benefits you must have foreign earned income your tax home must be in a foreign country and you must be one of the following. The foreign earned income exclusion only applies to earned income.

That amount varies and is indexed to inflation. The foreign earned income exclusion is a provision in the us tax code that allows us citizens who live abroad to fill out form 2555 each year and earn a certain amount of their income tax free. The foreign housing amount is the housing costs you paid with foreign earned income that exceeds 16 of the maximum exclusion or base amount. For this purpose foreign earned income is income you receive for services you perform in a foreign country in a period during which your tax home is in a foreign country and you meet either the bona fide residence test or the physical presence test.

The foreign earned income exclusion or feie is a tax benefit that allows you to exclude income earned in a foreign country from your taxable income for u s. If elected your first 97 600 99 200 in 2014 earned overseas is exempt from income tax unless you are an employee of the us government. Maximum foreign earned income exclusion amount. Citizen who is a bona fide resident of a foreign country or countries for an.

The maximum exclusion is 105 900 for tax year 2019 future years indexed for inflation. So for example in 2016 the amount was 101 300. This amount has a cap amount at 30 of the maximum. The amount of exclusion that a taxpayer is entitled to is equal to the lesser of foreign earned income for the year or the maximum exclusion divided by the total number of days 365 or 366 in the year times the number of qualifying days.

Check out more about how to use the feie to save on your taxes in our free guide everything americans working abroad need to know about us taxes. The foreign earned income exclusion feie is the most common and arguably the most widely used tax benefit for u s.