Foreign Earned Income Exclusion

1. US Expatriate Tax Break
Foreign Earned Income Exclusion

2. To claim the foreign earned income exclusion
the taxpayer must
• Have foreign earned income
• Have a tax home in a foreign country
• Meet one of two tests:
– the bona fide resident test
– the physical presence test

3. Have foreign earned income

4. Income
Earned Unearned
• Salaries • Interest
• Wages • Dividends
• Commission • Capital gains
• Bonuses • Gambling winnings,
• Professional fees • Alimony
• Tips • Social Security benefits
• Pensions
• Annuities

5. Foreign Earned Income
US Source Foreign Source

6. Foreign earned income
excludable up top
• 2012: $95,100
• 2011: $92,900
• 2010: $91,500
• 2009: $91,400

7. Employees of the US Government
Civilian & Military Compensation
US Source Income
Regardless of the country were work was performed

8. Have a tax home in a foreign country

9. Regular or Principle Place of
Business, Employment, Post of Duty

10. United States
Any territory under the
sovereignty of the United States
The 50 states and the District of Columbia

11. Territories and Possessions
of the United States
Northern Marianna Islands US Virgin Islands
Guam Puerto Rico
American Samoa

12. Foreign Country
Any territory under the sovereignty of a
government other than that of
the United States

13. Not Recognized
as a Foreign Country
Locations not under the
sovereignty of any government

14. International Waters

15. Antarctic Region

16. Orbiting the Earth

17. And Beyond

18. Bona Fide Residence Test
Residence is in a foreign country or countries for an indefinite amount
of time covering an entire calendar year from January 1 to December 31

19. Physical Presence Test
Physically present in a foreign country for a period of 330 full days,
from midnight to midnight, in a 12 month period

20. To claim the foreign earned income exclusion
the taxpayer must
• Have foreign earned income
• Have a tax home in a foreign country
• Meet one of two tests:
– the bona fide resident test
– the physical presence test