Foreign Income Exclusion

Foreign Earned Income Exclusion, IRS Form 2555

If you are subject to the US taxes (U.S. citizen or a US resident alien) and live overseas, you are taxed on your worldwide income (the US and Eritrea are the only two countries with such tax law). However, if you qualify, you may exclude from income up to $101,300 under tax code Section 911(b) (2) (D) (i) for the year 2016. In addition, you can exclude or deduct certain foreign housing amounts.

Tax Tip: Only earned income qualifies for exclusion. Other income such as interest, dividends, capital gains, etc. do not qualify. Generally, you may not live more than 35 days a year in the US during the year, and must file timely tax returns to claim the exclusion.  Consult a tax professional for filing delinquent 2555.

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