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.
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:
- 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.
- You must have foreign-earned income.
- You must be either:
- A U.S. citizen who is a bona fide resident of a foreign country for an entire tax year
- A U.S. resident alien who is a citizen or national of a country with which the United States has an income tax treaty in effect and who is a bona fide resident of a foreign country for an entire tax year, or
- A U.S. citizen or a U.S. resident alien who is physically present in a foreign country or countries for at least 330 full days during any period of 12 consecutive months.
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.