A:

If you are a U.S. citizen or resident alien, your income (except for amounts exempt under federal law), including that which is earned outside the U.S., is usually subject to U.S. income tax.

This includes earned income and unearned income, such as:

However, if you meet certain requirements, you are eligible to exclude up to $100,800 of your foreign-earned income from your 2015 U.S. income taxes (it will rise to $101,300 for 2016). This is referred to as the foreign-earned income exclusion.

In order to be eligible for the foreign-earned income exclusion, you must meet the following three requirements:

  1. Your tax home must be in a foreign country. Your tax home is defined as the general area of your main place of employment, where you are permanently or indefinitely engaged to work as an employee or self-employed individual regardless of where you maintain your family home. Note: Your place of residence can be different from your tax home.
  2. You must have foreign-earned income.
  3. You must be either:

This is a high level description of this provision, and other rules apply that could affect your eligibility to claim the foreign-earned income exclusion. For details, see IRS Publication 54 at www.irs.gov. See also IRS publication 519 to find out if you qualify as a U.S. resident alien for tax purposes. These publications are also available or by calling the IRS at 800-829-3676.

To read more frequently asked tax questions, Are there special benefits for U.S. armed forces personnel?, Does everyone have to file a federal tax return?, How can I make sure I'm ready to file my taxes? and Common Tax Questions Answered.

If you feel you will be unable to file your tax return by the deadline, see Get A Six-Month Tax Extension.

Question answered by Denise Appleby, CISP, CRC, CRPS, CRSP, APA

RELATED FAQS
  1. I am a non-U.S. citizen living outside the U.S. and trading stocks through a U.S. ...

    The tax implications for a foreign investor will depend on whether that person is classified as a resident alien or a non-resident ... Read Answer >>
  2. Can the government tax your capital gains from other countries?

    Learn more about how capital gains earned in foreign countries are treated by the IRS. Discover examples of special tax situations ... Read Answer >>
  3. I sold my house. Can I exclude the gain from my income?

    Generally, you are required to include the gain from the sale of your home in your taxable income. However, if the gain is ... Read Answer >>
  4. Will I pay taxes on my Social Security payouts?

    Find out if you're one of the people who has to pay federal income taxes on the Social Security benefit you receive. Read Answer >>
  5. Do I need to file an income tax return every year?

    Understand if a person needs to file a tax return every year. Learn the benefits of filing a yearly income tax return even ... Read Answer >>
  6. What is the difference between federal and state withholding tax?

    Discover whether you can file your taxes by yourself. The three main options for tax preparation are a tax professional, ... Read Answer >>
Related Articles
  1. Taxes

    Tax Rules For Resident And Nonresident Aliens

    This article examines the definition and tax treatment of these types of non-U.S. citizens.
  2. Economics

    What is a Resident Alien?

    A resident alien is a foreigner who is a permanent resident of the country in which he or she resides but does not have citizenship.
  3. Taxes

    Get A Tax Credit For Your Foreign Investments

    The foreign tax credit provides a break on investment income made and taxed in a foreign country.
  4. Taxes

    Understanding Taxation Of Foreign Investments

    Technically, any gains from foreign investments owned by an American citizen are subject to tax by the company's home country as well as the IRS. However, the Foreign Tax Credit enables you to ...
  5. Taxes

    6 Places To Retire For Low Income Taxes

    These states offer unique tax benefits for their long-term citizens.
  6. Taxes

    4 Tax Tips For Unemployed Workers

    Solid tax planning is essential. Unemployment can cause changes in your tax bracket and result in different allowable tax deductions.
  7. Taxes

    The Ultimate Tax-Time Checklist

    Find out what information you need to pull together before filling out your return.
  8. Taxes

    6 Sources For Free Tax Help

    From community-based services to free software, there are many free resources to help with your taxes.
  9. Taxes

    3 Federal Income Tax Facts You Didn't Know

    Learn about three federal income tax facts that most Americans may not know from one of the most trusted financial resources on the Web.
  10. Entrepreneurship

    Starting A Small Business: Taxes

    By Amy Fontinelle When you become a small business owner, you acquire a responsibility for making tax payments that you didn't have as an employee. Although you probably didn't realize it, your ...
RELATED TERMS
  1. IRS Publication 519 - U.S. Tax Guide For Aliens

    A document published by the Internal Revenue Service (IRS) that ...
  2. Bona Fide Foreign Resident

    Any resident of a foreign country that meets the IRS criteria ...
  3. IRS Publication 514

    A document published by the Internal Revenue Service that provides ...
  4. IRS Publication 513

    A document published by the Internal Revenue Service that details ...
  5. Income Tax

    A tax that governments impose on financial income generated by ...
  6. Tax Rate

    The percentage at which an individual or corporation is taxed. ...
Trading Center