Foreign Earned Income & Foreign Earned Income Exclusion
Question: What is foreign earned income? Is it income paid by a foreign person for working abroad, or is it income paid by a U.S. company for working abroad?
Answer:
Earned income is pay for personal services performed, such as wages, salaries, or professional fees. Foreign earned income is income you receive for services you perform in a foreign country or countries.
To qualify for the foreign earned income exclusion:
- Your tax home must be in a foreign country; and
- You must meet either the bona fide residence test or the physical presence test.
- It does not matter whether earned income is paid by a U.S. employer or a foreign employer.
Foreign earned income does not include the following amounts:
- The previously excluded value of meals and lodging furnished for the convenience of your employer.
- Pension or annuity payments including social security benefits.
- Payments by the U.S. Government, or any U.S. government agency or instrumentality, to its employees.
- Amounts included in your income because of your employer's contributions to a nonexempt employee trust or to a non-qualifying annuity contract.
- Recaptured unallowable moving expenses.
- Payments received after the end of the tax year following the tax year in which you performed the services that earned the income.
Additional Information:
- Form 2555 (PDF), Foreign Earned Income
- Form 2555EZ (PDF), Foreign Earned Income Exclusion
- Publication 514, Foreign Tax Credit for Individuals
- Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad
- Form 1116 (PDF), Foreign Tax Credit
Category: U.S. Aliens and Citizens Living Abroad
Subcategory: Foreign Earned Income & Foreign Earned Income Exclusion
