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Latest post on 16 November 2014 - 10:10

Thank you!!! Foreign Earned Income Exclusion If you meet certain requirements, you may qualify for the foreign earned income and foreign housing exclusions and the foreign housing deduction. If you are a U.S. citizen or a resident alien of the United States and you live abroad, you are taxed on your worldwide income. However, you may qualify to exclude from income up to an amount of your foreign earnings that is adjusted annually for inflation ($91,500 for 2010, $92,900 for 2011, $95,100 for 2012, and $97,600 for 2013). In addition, you can exclude or deduct certain foreign housing amounts. Limit on Excludable Amount The foreign earned income exclusion amount is adjusted annually for inflation. For tax year 2013, the maximum foreign earned income exclusion is up to $97,600 per qualifying person. If the individuals are married and both work abroad and meet either the bona fide residence test or the physical presence test, each one can choose the foreign earned income exclusion. Together, they can exclude as much as $195,200 for the 2013 tax year. Part Year Exclusion If you qualify under either the bona fide residence test or the physical presence test for only part of the year, you must adjust the maximum limit based on the number of qualifying days in the year. The number of qualifying days is the number of days in the year within the period on which you both: Have your tax home in a foreign country, and Meet either the bona fide residence test or the physical presence test. For this purpose, you can count as qualifying days all days within a period of 12 consecutive months once you are physically present and have your tax home in a foreign country for 330 full days. To figure your maximum exclusion, multiply the maximum excludable amount for the year by the number of your qualifying days in the year, and then divide the result by the number of days in the year. Physical Presence Test Under the physical presence test, a 12-month period can be any period of 12 consecutive months that includes 330 full days. If you qualify under the physical presence test for part of a year, it is important to carefully choose the 12-month period that will allow the maximum exclusion for that year. [b'>EXAMPLE[/b'>: You are a U.S. citizen, a bona fide resident of Country A, and working as a mining engineer. Your salary is $76,800 per year. You also receive a $6,000 cost of living allowance, and a $6,000 education allowance. Your employment contract did not indicate that you were entitled to these allowances only while outside the United States. Your total income is $88,800. You work a 5-day week, Monday through Friday. After subtracting your vacation, you have a total of 240 workdays in the year. You worked in the United States during the year for 6 weeks (30 workdays). The following shows how to figure the part for work done in the United States during the year. Number of days worked in the United States during the year (30) ÷ Number of days of work during the year for which payment was made (240) × Total income ($88,800) = $11,100. Your U.S. source earned income is $11,100. My husband is retired. edited by RRTNICU on 16/11/2014

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