Foreign Earned Income Exclusion for US Expats

Even if you’ve moved abroad for a brighter future, you still might have obligations towards the IRS. What happens if you earn income from sources outside the United States? If you live abroad, you might qualify for the foreign earned income exclusion (FEIE). This article explains what FEIE is and how it works, and provides some examples of situations where you might benefit from claiming it.

The U.S. retains its right to tax citizens and Green Card holders who live abroad and they must file their taxes even if they’re not physically present in the country. The foreign earned income exclusion (FEIE) allows U.S. taxpayers to exclude from their taxable income certain amounts they earn outside the United States. The FEIE was created in 1954 to relive American Citizens from the burden of double taxation when they move overseas.


The Foreign Earned Income Exclusion is an IRS exclusion that American expats can use to reduce their taxable income (or in some cases completely eliminate) i.e. their U.S. tax owing. It is the most common and the most widely used tool to reduce US expat tax owing that the IRS offers.

You don’t automatically receive the benefit of FEIE by just living abroad — you must meet specific qualifications which we will discuss later and submit the Form 2555.


U.S. citizens and resident aliens who meet certain requirements to exclude up to $120,000 of foreign-earned income in 2023 (The FEIE is adjusted every year for inflation). If used correctly, the FEIE can help you save thousands of dollars on your US taxes.

The maximum exclusion for 2024 is $126,500. If you’re filing under the married filing jointly status and your spouse also meets the FEIE requirements, you can exclude up to $253,000 of your foreign income in 2024.


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The Refundable Additional Child Tax Credit Guide For Expats

Navigating the labyrinthine U.S. tax system is challenging enough for American taxpayers living stateside, let alone for those residing abroad. One often-overlooked benefit that can make a significant difference on your expat tax return is the Refundable Additional Child Tax Credit (ACTC). This article aims to provide a comprehensive understanding of this credit, its refundable nature, and why it’s particularly beneficial for U.S. expats.


The ACTC is a tax credit designed to offer financial relief to families with children. Unlike the standard, nonrefundable Child Tax Credit, which requires the taxpayer to have lived in the U.S. for at least six months during the tax year, the ACTC has no such residency requirement. This makes it an invaluable asset for U.S. expats who may not meet the criteria for the standard Child Tax Credit but still have obligations for income taxes to the U.S. government.

For 2023, the refundable portion of this credit is worth up to $1,600 per qualifying child. The beauty of a refundable tax credit like the ACTC is that it not only reduces your tax liability to zero but can also result in a tax refund for the unused portion.


Tax credits come in two flavors: refundable and non-refundable. A nonrefundable credit, like the standard Child Tax Credit, can reduce your tax liability but won’t result in a tax refund if the credit amount exceeds your tax liability. On the other hand, a refundable tax credit like the ACTC can not only reduce your tax liability to zero but also result in a refund for the unused portion.

For example, if your federal tax return shows a tax liability of $1,000 and you qualify for a $1,400 ACTC, you would not only eliminate your tax liability but also receive a $400 refund from the IRS.
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Expats: Everything You Need To Know About Dividend Taxes

Many Americans living abroad are unaware about their US tax filing obligations and those who know often find themselves struggling to navigate through the complex tax laws. The US tax system is unusual, because it not only taxes its residents but also citizens and permanent residents living overseas. Filing from abroad becomes more complicated than filing within the US, as a new set of rules and forms applies to US expats.

What are dividends? 

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United States Tax Guide And Forms For Expatriates (2020)

Generally, if you are a United States citizen or permanent resident (Green Card Holder) living outside the United States for more than one year, you are called an expatriate or “expat.”* Rather than adding to the long list of tax guides that explain the general concepts of expat taxation,** we will focus on the specific requirements to file several US international tax forms, not well known. These are forms not well known, but they carry huge penalties for excluding or screwing up.

We will give you a general understanding of the following United States IRS Tax Forms:

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Guidance For Expatriates: Determining Net Worth For 877A Exit Tax Purposes - IRS Notice 97-19

We genuinely appreciate TaxConnections members for the important role they play in educating tax professionals and taxpayers on rules and regulations they surface in the IRS tax code. These treasures finds are very helpful to so many and in this case John Richardson identifies Guidance For Expatriate Under Section 877 2501 210 and
6039F known as IRS Notice 97-19. If you are an expatriate, this is an important IRS Notice for you to read.

Guidance For Expatriate Under Section 877 2501 210 and
6039F (Notice 97-19)


The Health Insurance Portability and Accountability Act of 1996
(the “Act”) recently amended sections 877, 2107 and 2501 of the Internal Revenue Code (the “Code”), and added new information reporting requirements under Section 6039F. This notice provides guidance regarding certain federal tax consequences under these sections and section 7701(b)(10) for certain individuals who lose U.S. citizenship, cease to be taxed as U.S. lawful permanent residents, or are otherwise subject to tax in the manner provided by section 877.

This notice has eleven sections:
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Impact Of Joe Biden’s Tax Plan: Considerations When Renouncing U.S. Citizenship

A U.S. citizen who renounces U.S. citizenship would be classified as either an expatriate or a covered expatriate. An expatriate is not subject to exit tax and would thereafter be treated the same way as any non-resident alien.

Who is a covered expatriate?

If you meet one of these three tests you would be a covered expatriate (there are some exceptions for people born with U.S. citizenship who remained a tax resident of the other country of citizenship, as well as for people who went out before the age of 18.5 years old):

  • The asset test would apply if your net wealth is worth more than two million dollars on the day you renounce.
  • The income tax test that would be if your tax liability was over 168 000 (as of 2019) over the prior five years. This only includes income tax (after foreign tax credits).
  • The compliance test, meaning that you can certify that they’ve been compliant for the five year period prior to renouncing.


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As you know the US Section 877A Expatriation Tax applies to U.S. citizens and “Long Term Residents”. A “Long Term Resident” is an individual who has had a Green Card (as defined by the rules in Internal Revenue Code Section 7701(b)(6) for at least eight of the fifteen years prior to expatriation). This has become a serious problem for Green Card holders who simply move from the United States and and don’t take formal steps to sever their U.S. tax residency. (They must either file the I-407 or use a tax treaty tie breaker election to expatriate. Otherwise they may be in a situation where they have no right to live in the United States (having lost the immigration status) but are taxable on their worldwide income (still being tax citizens).

That said, whether you are a U.S. citizen wishing to renounce U.S. citizenship or a Long Term Resident wishing to sever U.S. tax residency, you do NOT want to be a “covered expatriate“. Generally, (unless one is subject to two exceptions – dual citizen from birth or expatriation between 18 and 181/2 – that are beyond the scope of this post), one is treated as a “covered expatriate” if one meets any one of these three tests:
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Foreign Trusts - John Richardson

TaxConnections is posting this thoughtfully written comment on an article titled “Treasury Exempts Applicable “Tax-Favored Foreign Trusts” From The Form 3520… And Therefore Form 3520A Requirement” written by John Richardson. Here is a recommendation for Treasury to consider as posted by a David Johnstone.

Excellent post. Based on my reading of the Revenue Procedure, as well as feedback from practitioners in the UK or Australia, I have grave reservations about the claim that this Revenue Procedure will help “many” Americans abroad. Perhaps this is an example of an attempt to simplify things from a legal perspective that in practice – once one does the math – may lead to greater complexity and help a very small number of people at best.
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Olivier Wagner

You’re living your adventure and you’re settled in your new home, having non-US bank accounts, a non-US employer and a non-US social life. You have limited ties with the US and since the people who pay you (banks, employer) are not in touch with the IRS, you consider simply not filing US tax return. What could go wrong?

As you might know, on some level… US citizens are required to report their worldwide income on a US tax return, regardless of where they live.

Think AGAIN…

IRS has a few proven ways they use to track people down.

Below you will find the most common ways that IRS can track you down and check if you filed your US tax return, no matter where you live in the World.

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Helen Burggraf

The U.S. Internal Revenue Service unveiled a set of “new procedures” on Friday that it said would enable “certain” expatriates – a sub-group of “accidental Americans” who have renounced their citizenship, or are considering doing so – to avoid key taxes normally associated with renouncing.

Tax experts said the announcement was highly significant, and would likely be welcomed by many who fit the relatively narrow category of those likely to benefit from it. One suggested the scheme might help the IRS to focus its attention on the “bigger fish” it believes to be lurking in the overseas pond. 

In a statement, the Accidental Americans Association said it welcomed the initiative, but added that it did “not go far enough”. 

The “Relief Procedures for Certain Former Citizens” only applies to individuals who have relinquished their citizenship since March 18, 2010, or have not yet done so, who have less than US$2m in net worth, and who have never filed U.S. tax returns as U.S. citizens or residents, the IRS explained in a statement. 

They also must “owe [only] a limited amount of back taxes to the United States.”

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John Richardson - Dual Citizens

Due to all of the commentary from U.S. Citizens living abroad, I thought it was a good idea to include a portion of a post written by Tax Lawyer John Richardson:

“The Internal Revenue Code of the United States of America”
– Title 26

The beauty, genius and timeless wisdom found in the Internal Revenue Code include the principle that:

“The Internal Revenue Code in its majestic equality punishes both Homelanders and Americans abroad for having financial assets and accounts outside the United States.”

Part C – What does it mean to be a U.S. citizen abroad?

  1. All U.S. citizens abroad live outside the United States.Therefore, they live in “Foreign” countries. They will have bank accounts and retirement accounts that (although local to them) are “Foreign” to the United States. A FATCANatic (true believer in FATCA) would refer to your bank accounts as being “offshore”.
  2. Most U.S. citizens abroad are required to BOTH earn a living and invest for retirement.To this end they may have a pension from their place of employment (“foreign”). They may invest in mutual funds in their country of residence (foreign – PFIC). They may invest in retirement planning vehicles that are appropriate in their country of residence (foreign – PFIC). If you own an investment vehicle that is a PFIC, you should avoid either buying or selling without getting specialized counseling.
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To claim the foreign earned income exclusion, you must meet all three of the following requirements:

  1. Your tax home must be in a foreign country
  2. You must have foreign earned income
  3. 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 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 period of 12 consecutive months.

There are only two of the factors to be considered in determining whether you pass the bona fide residence test: the length of your stay and the nature of your job. You need to remember that you do not automatically acquire bona fide resident status just by living in a foreign country or countries for one year and your bona fide residence is not necessarily the same as your domicile. If you made a statement to local authorities in your residence country that you are not a resident of that country, and they determine you are not subject to their income tax laws as a resident, you can’t be considered a bona fide resident.

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