Aliens and U.S. Citizens Living Abroad > Foreign Income & Foreign Income Exclusion

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Frequently Asked Tax Questions

Aliens and U.S. Citizens Living Abroad - Foreign Income & Foreign Income Exclusion

Rev. date: 1/1/2011

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?

Employment Abroad
Foreign Earned Income
Foreign Earned Income Exclusion

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.
Your tax home must be in a foreign country.
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 nonqualifying 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

Publication 54 Tax Guide for U.S. Citizens and Resident Aliens Abroad Publication 514 Foreign Tax Credit for Individuals Form 2555 (PDF) Foreign Earned Income Form 2555EZ (PDF) Foreign Earned Income Exclusion Form 1116 (PDF) Foreign Tax Credit

Rev. date: 1/1/2011

Do I have to meet the 330-day physical presence test or have a valid working resident visa to be eligible for the foreign earned income exclusion?

To claim the foreign earned income exclusion, the foreign housing exclusion, or the foreign housing deduction:

You must have foreign earned income,
Your tax home must be in a foreign country, and
You must be one of the following:
- A U.S. citizen who is a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax year,
- A U.S. resident alien who is a citizen or national of a country with which the United States has an income tax treaty with a nondiscrimination article in effect and who is a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax year, or
- A U.S. citizen or resident alien who is physically present in a foreign country or countries for at least 330 full days during any period of 12 consecutive months.

U.S. tax law does not specifically require a foreign resident visa or work visa for this purpose, but you should comply with the foreign country's laws.

Additional Information

Publication 54 Tax Guide for U.S. Citizens and Resident Aliens Abroad Publication 514 Foreign Tax Credit for Individuals Form 2555 (PDF) Foreign Earned Income Form 2555EZ (PDF) Foreign Earned Income Exclusion Form 1116 (PDF) Foreign Tax Credit

Rev. date: 1/1/2011

I am a nonresident alien. Can I take the foreign earned income exclusion if I meet the bona fide resident test or physical presence test? If yes, what is the tax form used for nonresident taxpayer?

Alien
Alien, Nonresident
Bona Fide Residence Test
Exceptions to Bona Fide and Physical Presence Tests
Exclusion of Foreign Earned Income
Foreign Earned Income
Foreign Earned Income Exclusion
Foreign Earned Income and Housing: Exclusion - Deduction
Nonresident Alien Spouse Treated as a Resident
Nonresident Alien or Resident Alien?
Physical Presence Test
Presence Test
Substantial Presence Test
Tax Guide for U.S. Citizens and Resident Aliens Abroad
U.S. Citizen or Resident Alien (Other Than a Bona Fide Resident of Guam)
U.S. Citizen or Resident Alien (Other Than a Bona Fide Resident of the CNMI)
U.S. Citizen or Resident Alien (Other Than a Bona Fide Resident of the USVI)
U.S. Nonresident Alien Income Tax Return
U.S. Tax Guide for Aliens

Nonresident aliens do not qualify for the foreign earned income exclusion.
You must be either a U.S. citizen or resident alien of the United States, live and work abroad, and meet certain other qualifications to exclude a specific amount of your foreign earned income.
If you are the nonresident alien spouse of a U.S. citizen or resident alien, you can elect to be treated as a U.S. resident in order to file a joint return. In this case, you can take the foreign earned income exclusion if otherwise qualified.

Note: A nonresident alien is generally not subject to U.S. tax on compensation for services performed outside the United States. Thus, under the dual-status rules, nonresident aliens would not report their foreign earned income during the non-residency part of the tax year.

Additional Information

Publication 519 U.S. Tax Guide for Aliens

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