Individuals that are U.S. citizens or resident aliens of the United States living abroad are taxed on their income by more than one governmental entity. However, these taxpayers may qualify to exclude from their income an amount of their foreign earnings (adjusted annually for inflation) under I.R.C. § 911. They may also be eligible for either a foreign housing exclusion or the foreign housing deduction (this will be discussed in a future blog). To determine eligibility to claim either the foreign earned income exclusion, the foreign earned housing deduction or foreign earned housing exclusion, please consider the following analysis. Remember, that an experienced tax professional can offer assistance in making this analysis.
First, you must have foreign earned income other than from services you provided as a United States government employee or under a Personal Service Agreement with a U.S. government agency or instrumentality. Any earnings from services provided as a United States government employee or under a Personal Service Agreement with a U.S. government agency or instrumentality are not eligible for the foreign earned income exclusion, the foreign housing exclusion or the foreign housing deduction.
Next, your tax home must be in a foreign country. Also, you must either be a U.S. citizen, U.S. resident alien, or a citizen or national of a country with which the United States has an income tax treaty in effect. You must be a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax year. If all of the above applies, you may claim the foreign earned income exclusion, the foreign housing exclusion or the foreign housing deduction. If this isn’t the case, you may still qualify if you were physically present in a foreign country or countries for at least 330 full days during any period of 12 consecutive months.
If you are a U.S. citizens or U.S. resident alien living abroad and have any questions about the foreign earned income exclusion, the foreign housing exclusion or the foreign housing deduction, call THE TAX EXPERTS at the Thorgood Law Firm www.thorgoodlaw.com. For a FREE consultation, call 212-490-0704.
