Do you want to take advantage of the Foreign Earned Income Exclusion, the Foreign Housing Exclusion or the Foreign Housing Deduction? As a U.S. citizen or Green Card Holder living abroad, you still need to file annual U.S. federal tax returns. There are many different options, which American abroad has in order to cut the tax bill. However, the 3 above-mentioned ones are based on Foreign Earned Income.
So what is a Foreign Earned Income?
It’s crucial to understand what FEI is for US expats. We prepared this easy infographic to provide more clarity on this topic. The definition by the IRS states that it’s income you receive for services you perform in a foreign country:
- You must perform these services during a period your tax home is in a foreign country,
- You will need to meet either the Bona Fide Residence or the Physical Presence Test.
Check out the infographic below to understand the classification of types of income and what is considered to be NOT earned income. We also included what the IRS doesn’t count as a Foreign Earned Income.
Have a tax question? Contact Olivier Wagner.
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