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Maximum foreign earned income exclusion Form: What You Should Know

S. Income Tax, Self-Employment Tax & Corporation Income Tax (PDF) IRS 1099-DIV Form 2031: U.S. Income Tax for Individuals, Form 1099-DIV for Certain Other Individuals (PDF) 1099-DIV for Individuals and Family Members (PDF format) Form 1099-DIV: U.S. Income Tax, Self-Employment Tax & Corporation Income Tax (PDF) Form 1099-DIV: U.S. Income Tax, Self-Employment Tax & Corporation Income Tax (PDF) Form 1099-DIV: U.S. Income Tax, Self-employment Tax (PDF) Form 1099-DIV for Individuals and Family Members (PDF format) Form 1099-DIV: U.S. Income Tax, Self Employment Tax & Corporation Income Tax (PDF) 1099-DIVERSION FORM (PDF) 1099-INT REPORTABLE INCOME TAX (PDF) 1099-GARNISHMENT FORM (PDF) 1099-RECEIVABLE ELECTRONIC PROCEEDS (PDF) 1099-SUB-FORM (PDF) 1099-SUB-FORM: SELF-EMPLOYMENT DID (DOCX) 1099-SUB-FORM: SELF-EMPLOYMENT DID (PDF).

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FAQ - Maximum foreign earned income exclusion

What does the IRS mean by Line 13 of Form 2555-EZ? Does "Maximum foreign earned income exclusion" refer to the maximum allowed by law? If so, shouldn't they already know that?

They do know the number and is already filled in. You need that number lower down in the form. See line 16. They could provide the number in some other way, such as in the text at line 16, but this is the IRS’s writing style.

What is the American expat tax exclusion amount?

The answer is not simple. You should use a tax preparer familiar with the tax needs of expatriate American taxpayers.Even if your US tax is zero, you are legally obliged to file US taxes until your death or until your income level falls below statutory minimum.Expats have INDEPENDENT sets of filing requirements concerning their foreign financial matters; failure to comply makes you liable to high penalties:Income tax declarationForeign financial accounts and instruments reportForeign corporate interestsIncome tax on income earned from foreign activities is treated by one of two alternative regimes:FEIC (Foreign Earned Income Exclusion) If you are a legal resident of a foreign nation where you are taxed, you can opt to exclude up to a threshold maximum of some $90k, PRORATED only for the time you were not in the United States. If you are not a legal resident of the foreign nation, you cannot use this regime unless you were physically present for more than 6 months per calendar year (but most foreign nations would oblige you to be legally resident for that period length, anyway). This exclusion is ONLY FOR EARNED INCOME, not other sources of income like interest, social benefits, dividends, capital gains, gifts, inheritance or trust disbursements.FTC (Foreign Tax Credit) If you are taxed by a foreign government with which there is a double taxation treaty with the USA, you may opt for the regime where you deduct certain taxes paid to foreign governments from your calculated US tax amount.I reiterate, you also have to file “FBAR” reports every year that you total non-US liquid assets exceeded USD10k at any point in the year.

Do US Dual citizens pay taxes on income earned abroad?

If are a US citizen, the rule is as follows - even if you are residing outside the United States or have dual citizenship, you are subject to U.S. federal income tax and reporting on your worldwide income. Citizens living abroad must annually report all of their income to the IRS, just as they did prior to moving abroad, whether the income is from U.S. sources or foreign sources and whether or not the income is taxed or reported in the new country of residence. This system of citizenship-based taxation (rather than residence-based taxation) is unique to the United States (the only other country that taxes its citizens in this manner is Eritrea).For some further pointers on this topic, please see our recent article on Money 101 regarding common U.S. expat tax myths:http://time.com/money/4298634/ex...That being said, the good news is both U.S. domestic tax law and U.S. tax treaties contain a number of provisions that are designed to prevent “double taxation,” or taxation on the same income in both countries (e.g., the U.S. and the new country of residence). Domestic law provisions include the foreign earned income exclusion (for 2024. you can exclude up to $101,300 of your foreign earned income), the foreign housing exclusion, and the foreign tax credit. These provisions, in many cases, can reduce or even eliminate the U.S. federal income tax that would otherwise be due by you. Keep in mind, however, that even if no U.S. tax is owed, a U.S. tax return still generally must be filed in order to benefit from these provisions, and the failure to do so can result in severe penalties.In order to escape the U.S. tax net, you may consider renouncing your citizenship, but this involves a number of unique tax issues. Please see our recent article on CNBC US Home for an analysis of these issues.http://www.cnbc.com/2016/05/17/e...

I am a U.S. citizen abroad and do not pay income tax due to the foreign income exclusion rule. Should I open an IRA and contribute the maximum each year if my income is not taxed?

It's possibly a good time to open a Roth IRA. More research is required to see if this situation would be beneficial for you. My thought is that you will get a double benefit this way as you aren't paying taxes going in, and you won't pay the taxes on the interest when you retire. Run this idea past your tax accountant and your financial planner.=====edit: link to IRS page for info: Roth IRAsYes, if your AGI actually drops to below $10K, you won't qualify to contribute to a Roth IRA. This doesn't stop you from saving for retirement. If you have a financial planner you trust, then by all means invest in some other non-retirement plan. But, you won't get a tax benefit for it.

Is the housing allowance for American expatriates in the UK considered taxable income?

It is possible that some of your foreign housing allowance may be excluded from regular income tax. You calculate your daily housing expense and deduct a base housing cost standard which is equal to 16% of the Foreign Earned Income Exclusion. For 2024. you would add up your total foreign housing expense. Note that some housing expense items do not qualify. Subtract $15,872 from your total. If you were living in the foreign country less than a full year, you figure your exclusion based on the number of days you were there times $43.48. The resulting amount is your eligible foreign housing cost.There is a maximum amount that may be excluded equal to 14% of the Foreign Earned Income Exclusion for the tax year. (For 2024 the FEIE is $99,200 so 14% of that is $13,888 or $38.05 per day) The time period is somewhat irrelevant as long as you qualify for the Foreign Earned Income Exclusion. To qualify for the FEIE, you have to either meet the Bona Fide Residence or Physical Presence Test. Knowing that you will be located overseas a limited time might impact you meeting the Bona Fide Residence Test.You should note that there is also the option to take a foreign housing cost deduction if your allowable housing costs exceed the exclusion amount. Also claiming the exclusion may prevent you from benefiting from foreign tax credits and certain other tax deductions related to the excluded income. Your tax rates for both regular and AMT taxes are calculated as if the exclusion had not been applied.You claim the exclusion or deduction on Form 2555. Page on irs.gov.

I’ve received an offer for USD 90,000 PA for a position in Seoul. We are a family of two. Is this is a good salary considering further income tax cuts? Also, how much will I get taxed?

The foreign earned income exclusion is available only for income earned for services performed in a foreign country, and is claimed on IRS Form 2555 or 2555-EZ. The maximum foreign earned income exclusion is indexed annually for inflation; for 2024. it was $100,800 per person. However, the Personal Income Tax Rate in South Korea stands at 40 percent. If you can land a US job, you may be better off tax wise.

If I am a US citizen, but work for and am paid by a foreign company do I still have to pay US income taxes on money earned?

Because you are a US citizen, the rule is as follows - even if you are residing outside the United States, you are subject to U.S. federal income tax and reporting on your worldwide income. This includes income paid to you as compensation from a foreign company. Citizens, even those living and/or working abroad must annually report all of their income to the IRS, whether the income is from U.S. sources or foreign sources and whether or not the income is taxed or reported in the new country of residence. This system of citizenship-based taxation (rather than residence-based taxation) is unique to the United States (the only other country that taxes its citizens in this manner is Eritrea).For some further pointers on this topic, please see our recent article on Money 101 regarding common U.S. expat tax myths:http://time.com/money/4298634/ex...That being said, the good news is both U.S. domestic tax law and U.S. tax treaties contain a number of provisions that are designed to prevent “double taxation,” or taxation on the same income in both countries (e.g., the U.S. and the new country of residence). Domestic law provisions include the foreign earned income exclusion (for 2024. you can exclude up to $101,300 of your foreign earned income), the foreign housing exclusion, and the foreign tax credit. These provisions, in many cases, can reduce or even eliminate the U.S. federal income tax that would otherwise be due by you. Keep in mind, however, that even if no U.S. tax is owed, a U.S. tax return still generally must be filed in order to benefit from these provisions, and the failure to do so can result in severe penalties.In order to escape the U.S. tax net, you may consider renouncing your citizenship, but this involves a number of unique tax issues. Please see our recent article on CNBC US Home for an analysis of these issues.http://www.cnbc.com/2016/05/17/e...

Do Americans pay taxes on income earned while working in China? This would be on a low 6-figure salary.

Americans have to file taxes until death, regardless of where you earn a living or how much, and regardless of whether you owe any tax or not. In addition, you have to ALSO notify a separate body, FINCEN, (due to the infamous FATCA) each year by June 30 of every non-US account you have, if your aggregate total amount on deposit in any given year exceeds the equivalent of US$ 10k.Although you have to file US taxes AND the FATCA declarations if you have foreign income and accounts, you can lower or even eliminate taxes due to the IRS by one of two mutually-exclusive elective regimes for calculating US tax on foreign earned income:Foreign Earned Income Exclusion - that is an exclusion of taxation on foreign-earned income (salaries, honoraria, consulting fees…) up to an amount prorated by the proportion of the year you are either physically present in a given country or a Bona Fide Resident of that country; it is contingent upon you having to file and pay taxes in the foreign country concerned, provided it has a taxation treaty with the US. If your foreign income exceeds that threshold, you would then owe US taxes on the difference.Foreign Tax Credit. You can also opt to calculate all your worldwide income as if you had earned your living in the US, and then deduct certain taxes that you had paid to the foreign country of residence.In most cases, if you are earning under the Exclusion threshold (prorated up to a maximum of US$101k), the FEIE is the easiest to manage. However, if you are earning over the threshold, it is usually less overall tax (US + Foreign tax) if you elect the “Foreign Tax Credit” since most foreign income taxes are higher than the US․ i.e. the amount you pay to a foreign government in tax would exceed what the equivalent US taxes would be on the same income, so the [US tax due]-[Foreign tax paid] is usually .Beware of “non earned” foreign income (passive income, social benefits, pensions, foreign alimony, trust fund income, rental income, inheritance etc.). Such income is NOT part of the FEIE regime, and the FTC regime treatment depends entirely upon the tax treaty between the two countries.So, each country has a separate taxation treaty with the US and your circumstances would affect exactly how the taxes are calculated. Consult with a US tax preparer who is versed in current US taxation.

I am a U.S. citizen working in Hong Kong. The double tax would make it very difficult for my family and I to survive here. How can I alleviate my tax situation?

Talk to an accountant, since I think you are very likely to be vastly overpaying your taxes. See following for a list, and I have some personal recommendations if you need themConsulate General of the United States Hong Kong & MacauNow1) there is no double taxation. Your HK tax can be set up as a foreign tax credit from your US tax. (Note: this has to be done carefully, so you should have an accountant do it once for you. There are a lot of subtle issues here like the fact that the HK tax year is different from the US tax year, the difference between accural and cash basis, and the fact that taxes that come from income that you are excluding cannot be used as a credit.)2) you have an income and housing exclusion. The net result of this is that your first USD 150K is not subject to US taxIf you have been double paying taxes, get an accountant *NOW*. You can file amended tax returns for three years.Bottom line is that filling out the tax forms is painful, but the tax rates aren't that bad. Part of your money will go to the US. Part of it will go to Hong Kong. Figuring which is which will take you over 30 pages. My first years tax return was over 100 pages. The amount wasn't that bad, but it was trying to split the year between the time I was in Hong Kong, the time I was in the US, the different tax years, and doing this three times to see if I hit the AMT or capital gains limits.

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