Foreign Earned Income

Foreign earned income. In this article we will look at foreign earned income exclusion the requirements to qualify and how it works. The united states taxes citizens and residents on their worldwide income. It does not include amounts received for personal services provided to a corporation that represent a distribution of earnings and profits rather than reasonable compensation. Yes foreign earned income exclusion is applicable to self employment income as it is earned income and in your case you can prevent your earned freelance income from being double taxed.

Citizens and residents living and working outside the u s. Taxpayers earning income overseas to avoid double taxation on a portion of that income. To qualify they must demonstrate that they either spent 330 days outside of the us in a 365 day. There is a lot of talk about the foreign earned income exclusion feie and the foreign tax credit ftc in the us expat community but not much is said about how the income is classified.

Foreign earned income means wages salaries professional fees or other amounts paid to you for personal services rendered by you. May be entitled to a foreign earned income exclusion that reduces taxable income. Foreign earned income is income you receive for services performed in a foreign country during the period your tax home the general area of your main place of business employment or post of duty where you are permanently or indefinitely engaged to work is in a foreign country and whether you meet the bona fide residence test or physical. The foreign earned income exclusion the foreign housing exclusion and the foreign housing deduction are based on foreign earned income.

For this purpose foreign earned income is income you receive for services you perform in a foreign country in a period during which your tax home is in a foreign country and you meet either the bona fide residence test or the physical presence test. The foreign earned income exclusion. Foreign earned income exclusion feie. Claiming the foreign earned income exclusion lets expats exclude the first 105 900 in 2019 of their earned income from us tax.

The foreign earned income exclusion allows u s. In order to qualify for the credit you must be a u s. Expats can claim the foreign earned income exclusion by filing irs form 2555. For 2019 the maximum exclusion is 105 900 per taxpayer future years indexed for inflation.