International Taxpayers-Foreign Earned Income Exclusion

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.

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About cozbycpa

Heather L. Cozby is a CPA on the South Shore and Cape Cod. The managing partner of Cozby & Company, LLC, Heather has the resources and experience necessary to provide quality professional services on a timely basis and at a reasonable cost. She specializes in tax planning & preparation; audit, review & compilation services; management advisory services; bookkeeping; and accounting. Her unique niche is in working with homeowners’ associations and condominium trusts, advising with rental real estate, and providing outsourced financial consulting for mid-sized companies. She is more entrepreneurial than most accountants, and offers the best of both worlds - providing the services of a larger firm while retaining the ability to connect with her clients on a personal level.
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