FEIE Foreign Earned Income Exclusion
The Foreign Earned Income Exclusion (FEIE) is an important tax benefit for US citizens and resident aliens living and working abroad according to IRS. The FEIE allows these individuals to exclude a certain amount of foreign-earned income from their US federal income tax returns, thereby reducing their overall tax liability. However, not everyone is eligible for the FEIE.
How to Qualify for the FEIE?
According to a published article in Investopedia, to qualify for the FEIE, you must meet certain requirements. First, you must have foreign-earned income, which is income earned while living and working abroad. Second, your tax home must be in a foreign country, which means you must have a closer connection to that country than to the United States. Finally, you must meet one of three conditions: be a bona fide resident of a foreign country for an uninterrupted period that includes an entire tax year, be a US resident alien with a tax treaty in effect who is a bona fide resident of a foreign country for an uninterrupted period that includes an entire tax year, or be physically present in a foreign country for at least 330 full days during any period of 12 consecutive months.
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If you meet these requirements, you may be able to exclude your foreign-earned income up to a certain amount each year. For 2023, the exclusion amount is $120,000. You may also be able to exclude or deduct certain foreign housing amounts, and the value of meals and lodging provided by your employer on their premises.
To determine whether your foreign-earned income is eligible for the FEIE, you can use the IRS’s Interactive Tax Assistant tool. It is also recommended that you consult a tax professional who can guide you through the process and ensure that you meet all the requirements and comply with IRS regulations.
The FEIE is a valuable tax benefit for US citizens and resident aliens living and working abroad. By understanding the requirements and qualifications for the FEIE and seeking professional assistance when necessary, you can reduce your tax liability and maximize your earnings while living and working overseas.
