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Foreign Earned Income Exclusion

Foreign Earned Income ExclusionForeign Earned Income Exclusion

The foreign earned income exclusion is a tax exclusion to help prevent US citizens and resident aliens from being subject to double taxation. In this article, we will go over the basics of what the foreign earned income exclusion covers.

Foreign Earned Income

First, it is important to understand what foreign income includes and what it does not include. The IRS defines foreign income as “wages, salaries, professional fees, or other amounts paid to you for personal services rendered by you.” However, foreign income does not include the following:


Qualifying for the Foreign Earned Income Exclusion

You must meet certain requirements to qualify to claim the foreign earned income exclusion. First, your tax home must be in a foreign county. Second, you must be one of the following:

What You Can Exclude

If you qualify for the foreign earned income exclusion, you may wonder what you can exclude. In some instances, you may qualify to exclude foreign income up to $112,000 for the 2022 tax year. Additionally, you can deduct certain foreign housing expenses for that income. Some can also deduct the value of meals and lodging provided to you by your employer on their premises and for your convenience. These deductions help reduce how much of your foreign income is taxable in the United States.

There is a special provision if you have foreign earned self-employment income. You can exclude this amount from your taxable income. However, these amounts will still be subject to self-employment tax.

Utilizing the Foreign Earned Income Exclusion

If you think that you may qualify for utilizing the foreign earned income exclusion, meet with an experienced tax preparer who can help you take this exclusion properly.

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