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You must meet the requirements of either the Bona Fide or the Physical Presence Test in order to exclude these costs. Housing expenses that qualify for the exclusion include:. The amount of foreign income that you can exclude is limited to your annual maximum dollar amount limit or actual foreign wages, whichever is less.
Below are the maximum amounts for foreign income tax exclusion since the Tax Year adjusted for inflation :. After answering a few simple questions, the eFile app will select and generate the correct forms needed to claim the foreign income tax exclusion. The correct forms are as follows: Form , Foreign Earned Income if you are also claiming foreign housing cost amount exclusion or Form EZ, Foreign Earned Income Exclusion if you are only claiming the foreign income tax exclusion.
To view a full list of forms, click here and take note of the many forms eFile. Generally, you are required to pay self-employment taxes if you are abroad and a self-employed U. Your net self-employment income is used to figure your net earnings from self-employment.
Net self-employment income usually includes all business income minus all business deductions allowed for income tax purposes, while net earnings from self-employment is a portion of net self-employment income. This amount is figured on Schedule SE, Self-Employment Tax , The actual self-employment tax is figured on net earnings from self-employment. You must take all of your self-employment income into account when figuring your net earnings from self-employment, including income that's exempt from income tax because of the foreign earned income exclusion.
If you are a U. In addition, you must pay the self-employment tax regardless of whether the income is exempt from U. If you were a civilian who served in a combat zone or a qualified hazardous duty area in support of the U. Armed Forces , you can receive a deadline extension for the following:. Income taxes are forgiven for a U. Government civilian employee who dies as a result of injuries or wounds incurred while employed by the U.
The injuries or wounds must have been caused by military or terrorist action directed against the United States or its allies. The taxes are forgiven for the deceased employee's tax years beginning with the year immediately before the year in which the injury or wounds occurred and ending with the year of death.
If you and your deceased spouse filed a joint return, only your spouse's part of the joint tax liability is forgiven. Get Your Tax Refund Date. What is DocuClix? Security About eFile. Where Is My Refund? How to Check Refund Status efile. Mailing Addresses Contact eFile. If you qualify, you claim the Foreign Tax Credit by filing Form The Foreign Earned Income Exclusion is the most common tool expats use to avoid double taxation on income earned overseas.
First, you must spend a certain number of days outside the U. The maximum foreign earned income exclusion amount is updated every year.
The exclusion applies to each of you separately, so you each may qualify for the maximum amount unless only one of you works. Something to note is that the exclusion does not apply to passive income such as interest and dividends.
Whether working abroad or in the U. Still unsure about foreign income taxes? Ready to file your U. No matter how complicated your U. To meet the bona fide residence test, you must have established a bona fide residence in a foreign country.
Your bona fide residence is not necessarily the same as your domicile. Your domicile is your permanent home, the place to which you always return or intend to return. You could have your domicile in Cleveland, Ohio and a bona fide residence in Edinburgh, Scotland, if you intend to return eventually to Cleveland.
The fact that you go to Scotland does not automatically make Scotland your bona fide residence. If you go there as a tourist, or on a short business trip, and return to the United States, you have not established a bona fide residence in Scotland.
But if you go to Scotland to work for an indefinite or extended period and you set up permanent quarters there for yourself and your family, you probably have established a bona fide residence in a foreign country, even though you intend to return eventually to the United States. You are clearly not a resident of Scotland in the first instance.
However, in the second, you are a resident because your stay in Scotland appears to be permanent. If your residency is not as clearly defined as either of these illustrations, it may be more difficult to decide whether you have established a bona fide residence. Questions of bona fide residence are determined according to each individual case, taking into account factors such as your intention, the purpose of your trip, and the nature and length of your stay abroad.
Statement to foreign authorities. You are not considered a bona fide resident of a foreign country if you make a statement to the authorities of that country that you are not a resident of that country, and the authorities:.
Special agreements and treaties. An income tax exemption provided in a treaty or other international agreement will not in itself prevent you from being a bona fide resident of a foreign country. Whether a treaty prevents you from becoming a bona fide resident of a foreign country is determined under all provisions of the treaty, including specific provisions relating to residence or privileges and immunities. Uninterrupted period including entire tax year.
To meet the bona fide residence test, you must reside in a foreign country or countries for an uninterrupted period that includes an entire tax year. An entire tax year is from January 1 through December 31 for taxpayers who file their income tax returns on a calendar year basis.
During the period of bona fide residence in a foreign country, you can leave the country for brief or temporary trips back to the United States or elsewhere for vacation or business. To keep your status as a bona fide resident of a foreign country, you must have a clear intention of returning from such trips, without unreasonable delay, to your foreign residence or a new bona fide residence in another foreign country. Example 1. You arrived with your family in Lisbon, Portugal, on November 1, Your assignment is indefinite, and you intend to live there with your family until your company sends you to a new post.
You immediately established residence there. You spent April at a business conference in the United States. Your family stayed in Lisbon. Immediately following the conference, you returned to Lisbon and continued living there. On January 1, , you completed an uninterrupted period of residence for a full tax year , and you meet the bona fide residence test. Example 2. Assume the same facts as in Example 1, except that you transferred back to the United States on December 13, You would not meet the bona fide residence test because your bona fide residence in the foreign country, although it lasted more than a year, did not include a full tax year.
You may, however, qualify for the Foreign Earned Income Exclusion or the housing exclusion or deduction under the physical presence test. Bona fide resident for part of a year. Once you have established bona fide residence in a foreign country for an uninterrupted period that includes an entire tax year, you are a bona fide resident of that country for the period starting with the date you actually began the residence and ending with the date you abandon the foreign residence.
Your period of bona fide residence can include an entire tax year plus parts of 2 other tax years. You were a bona fide resident of Singapore from March 1, , through September 14, On September 15, , you returned to the United States. Since you were a bona fide resident of a foreign country for all of , you were also a bona fide resident of a foreign country from March 1, , through the end of and from January 1, through September 14, If you are assigned from one foreign post to another, you may or may not have a break in foreign residence between your assignments, depending on the circumstances.
You were a resident of Pakistan from October 1, , through November 30, On December 1, , you and your family returned to the United States to wait for an assignment to another foreign country. Your household goods also were returned to the United States.
Your foreign residence ended on November 30, , and did not begin again until after you were assigned to another foreign country and physically entered that country. Since you were not a bona fide resident of a foreign country for the entire tax year of or , you do not meet the bona fide residence test in either year.
You may, however, qualify for the foreign earned income exclusion or the housing exclusion or deduction under the physical presence test, discussed later.
Assume the same facts as in Example 1 , except that upon completion of your assignment in Pakistan you were given a new assignment to Turkey. On December 1, , you and your family returned to the United States for a month's vacation. On January 2, , you arrived in Turkey for your new assignment. Because you did not interrupt your bona fide residence abroad, you meet the bona fide residence test.
You meet the Physical Presence Test if you are physically present in a foreign country or countries for full days during a period of 12 consecutive months. The days do not have to be consecutive. Any U. The physical presence test is based only on how long you stay in a foreign country or countries.
This test does not depend on the kind of residence you establish, your intentions about returning, or the nature and purpose of your stay abroad. Generally, to meet the physical presence test, you must be physically present in a foreign country or countries for at least full days during a month period. You can count the days you spent abroad for any reason. You do not have to be in a foreign country only for employment purposes. You can be on vacation. You do not meet the physical presence test if illness, family problems, a vacation, or your employer's orders cause you to be present for less than the required amount of time.
You can be physically present in a foreign country or countries for less than full days and still meet the physical presence test if you are required to leave a country because of war or civil unrest. Full day. A full day is a period of 24 consecutive hours, beginning at midnight. When you leave the United States to go directly to a foreign country or when you return directly to the United States from a foreign country, the time you spend on or over international waters does not count toward the day total.
You leave the United States for France by air on June You arrive in France at a. Your first full day of physical presence in France is June Passing over a foreign country. If, in traveling from the United States to a foreign country, you pass over a foreign country before midnight of the day you leave, the first day you can count toward the day total is the day following the day you leave the United States.
You leave the United States by air at a.
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