Did you work and earn income overseas? This video will help you determine if you qualify for the Foreign Earned Income Exclusion, which can reduce your federal income tax.
One common misconception about this exclusion is that if you live overseas and are able to exclude all of your income so that you don’t owe any tax, you don’t need to file an income tax return. This is incorrect. Even if taxpayers have no tax liability, they must file a U.S. tax return and attach Form 2555 or Form 2555-EZ in order to actually claim the exclusion.
Foreign earned income is earned while your tax home (where you work permanently or indefinitely) is in a foreign country and you meet a bona fide residence test or physical presence test. Examples of income which qualify include salaries and wages, commissions, bonuses, professional fees, and tips.
Income sources such as interest, dividends, capital gains, gambling winnings, alimony, Social Security benefits, and pensions are not considered foreign earned income for this purpose.
See Publication 54, “Tax Guide for U.S. Citizens and Resident Aliens Abroad”, for more information.