Living abroad can create many complex tax situations for U.S. citizens and resident aliens. If you're a U.S. citizen living abroad, the U.S. taxes your entire global income. But if you are a resident of a foreign country, you may qualify for the Foreign Earned Income Exclusion (FEIE), the Foreign Housing Exclusion, or the Foreign Housing Deduction.
What is the Foreign Earned Income Exclusion?
If you are a U.S. citizen or resident alien living abroad, the U.S. taxes you on your worldwide income. However, you may qualify to exclude foreign income up to an amount adjusted annually for inflation, also known as the Foreign Earned Income Exclusion. You may qualify for the FEIE if you have foreign income and your home is in a foreign country. You must also be:
- A U.S. citizen who is a “bona fide resident” of a foreign country or countries for an uninterrupted period that includes the tax year in question,
- A U.S. resident alien and a resident of a foreign country that has an income tax treaty with the U.S. in effect, and you are also a “bona fide resident” of a foreign country or countries for an uninterrupted period that includes the tax year in question,
- A U.S. resident alien or U.S. citizen is physically present in a foreign country for at least 330 full days during a 12-month period.
Foreign income doesn't include:
- Military or civilian pay from the U.S. government,
- The money you receive for services performed in international waters or airspace, not a foreign country,
- Payments you receive after the tax year ends for services performed during the tax year,
- Social security, pension, and annuity payments, or
- Pay that's excludable from income, such as meals and lodging provided for the convenience of your employer and on their premises.
The FEIE for 2022 is $112,000, and $120,000 for the 2023 tax year. To claim the FEIE, you'll use IRS Form 2555.
Hire an Experienced Tax Attorney
If you have a complex tax situation, including foreign income, it may be time to consult an experienced tax professional. You need professional advice to review all your legal tax options. If you need help, call Senior Partner, Tax Controversy Attorney, and former IRS attorney Brandon A. Keim at (602) 200-7399 or contact him online to discuss your options.