Frequently Asked Tax Questions
U.S. Aliens and Citizens Living Abroad - Foreign Earned Income & Foreign Earned Income
Exclusion
Rev. date: 12/21/2012
Earned income is pay for personal services performed, such as wages, salaries, or professional fees. Foreign earned income is income you receive for services you perform in a foreign country or
countries.
To qualify for the foreign earned income exclusion:
- Your tax home must be in a foreign country; and
- You must meet either the bona fide residence test or the physical presence
test.
- It does not matter whether earned income is paid by a U.S. employer or a foreign
employer.
Foreign earned income
does not include the following amounts:
- The previously excluded value of meals and lodging furnished for the convenience of your
employer.
- Pension or annuity payments including social security benefits.
- Payments by the U.S. Government, or any U.S. government agency or instrumentality, to its
employees.
- Amounts included in your income because of your employer's contributions to a nonexempt employee trust or to a non-qualifying annuity
contract.
- Recaptured unallowable moving expenses.
- Payments received after the end of the tax year following the tax year in which you performed the services that earned the
income.
Rev. date: 12/19/2012
To claim the foreign earned income exclusion and either the foreign housing exclusion or the foreign housing
deduction:
- You must have foreign earned income,
- Your tax home must be in a foreign country, and
- You must be one of the following:
- 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,
- A U.S. resident alien who is a citizen or national of a country with which the United States has an income tax treaty and who is a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax year,
or
- A U.S. citizen or resident alien who is physically present in a foreign country or countries for at least 330 full days during any period of 12 consecutive
months.
U.S. tax law does not specifically require a foreign resident visa or work visa for this purpose, but you should comply with the foreign country's
laws.
Rev. date: 12/21/2012
Nonresident aliens do not qualify for the foreign earned income
exclusion.
- You must be either a U.S. citizen or resident alien of the United States, live and work abroad, and meet certain other qualifications to exclude a specific amount of your foreign earned
income.
- If you are the nonresident alien spouse of a U.S. citizen or resident alien, you can elect to be treated as a U.S. resident in order to file a joint return. In this case, you can take the foreign earned income exclusion if you are otherwise
qualified.
Note:
A nonresident alien is generally not subject to U.S. tax on compensation
for services performed outside the United States. Even if a nonresident
alien was subject to the special dual-status rules, he or she would not be
subject to U.S. tax on his or her foreign earned income during the nonresidency
part of the tax year.
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