The foreign earned income exclusion is a provision under the Internal Revenue Code that allows certain U.S. taxpayers to exclude a specific amount of income earned abroad from their taxable income. This exclusion is designed for individuals who live and work outside the United States, helping to alleviate the tax burden on income earned in foreign countries.
This term is primarily used in tax law, particularly for U.S. citizens and resident aliens who earn income while living abroad. It is relevant in the context of international taxation and can involve various forms and procedures for claiming the exclusion. Taxpayers can utilize legal templates from US Legal Forms to assist in filing the necessary forms and ensuring compliance with tax regulations.
Here are a couple of examples of abatement:
Example 1: A U.S. citizen living in Germany for the entire tax year earns $100,000. They may be eligible to exclude a portion of this income from U.S. taxes under the foreign earned income exclusion.
Example 2: A U.S. resident alien works in Canada for 350 days in a year. They can potentially claim the exclusion based on the physical presence test. (hypothetical example)
The foreign earned income exclusion is governed by Section 911 of the Internal Revenue Code. This statute outlines the eligibility criteria and the process for claiming the exclusion.
| Term | Description |
|---|---|
| Foreign Tax Credit | A credit for taxes paid to foreign governments, which can reduce U.S. tax liability. |
| Bona Fide Residence Test | A test to determine if a taxpayer is a genuine resident of a foreign country for tax purposes. |
| Physical Presence Test | A test based on the number of days a taxpayer is physically present in a foreign country. |
If you believe you qualify for the foreign earned income exclusion, you should:
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| Attribute | Details |
|---|---|
| Eligibility | U.S. citizens and resident aliens living abroad |
| Exclusion Amount | Subject to annual limits set by the IRS |
| Forms Required | IRS Form 2555 |
It is a tax provision that allows certain U.S. taxpayers to exclude a portion of their income earned abroad from U.S. taxation.