expat tax help blog


Posted By: Clark Stott

Claim the Foreign Earned Income Exclusion to wipe out your IRS tax liability

Do I qualify for the Foreign Earned Income Exclusion?

You could, if you are a US expatriate outside the United States, your tax home has moved abroad to a foreign country and you have foreign earned income. In other words, you are getting a salary from employment in a foreign country.

Now, in order to get the benefits of the exclusion you need to meet one of the two tests.

·         The first test is called the Physical Presence Test (PPT). This counts the number of days outside the United States in any 365-day period, starting with the first full foreign day overseas. You need to have been outside of the United States for at least 330 full days and then you meet the PPT test.

·         The second test is called the Bonafide Residents Test (BFR), and this is simply a full calendar year outside of the United States living and working in the foreign location. It needs to be from January 1st to December 31st.

If you meet either one of the two tests, you have moved abroad and you have the foreign earned income then yes, you would qualify for the benefits of the foreign earned income exclusion.

The benefit is you can exclude up to $100,800 of taxable income from before calculating any tax payable to the IRS. This amount if for tax year 2015. This amount gets indexed for inflation marginally every year so it can change by a few hundred dollars each year.

If you have a spouse and they are working overseas too, they can get the benefits of their own full Foreign Earned Income Exclusion if they meet one of the two tests above.

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Date published: 07/20/2016