United States, 10th September: Are you working overseas? And do you know what exactly is Foreign Earned Income Exclusion?
Are you a foreigner working abroad? If yes, then you must know what Foreign Earned Income Exclusion is.
You also need to know the benefits of working overseas. Let us see this subject in detail here.
Working abroad—If you are working abroad, you need to know the benefits of working abroad. One of the biggest advantage of working abroad is Foreign Earned Income Exclusion. It is also known as FEIE.
FEIE enables any foreign worker to take a tax inclusion for income earned by him or her outside the US. However, this benefit is available only when one fulfills certain qualifications.
<blockquote> Are you working overseas? If yes, then you must know the benefits of working overseas including Foreign Earned Income Exclusion. </blockquote>
FEIE—How it works—Any income earned by American citizens in any nation in the world gets taxed. However, if you fulfill two requirements, then you can certainly take the benefit of Foreign Earned Income Exclusion. In other words, we can say that you can avail a tax exclusion on income tax return for any income you earn overseas.
What is the annual limit of tax exclusion on income tax return?—Well, as per the rules for 2015, the total annual limit of tax exclusion of a maximum of $100,800. This exclusion on income tax return for any income earned abroad is for each person. So, if you are married and you as well as your spouse are working overseas, then both of you can get the full exclusion(that is, $100,800 for each).
Which wages or income are covered under Foreign Earned Income Exclusion?—Well, one needs to know that this exclusion is for self-employment income or wages earned for any services performed by the US citizens outside the US.
However, one needs to note that businesses are not eligible for getting Foreign Earned Income Exclusion. Only individuals are considered eligible for such exclusion.
Any of the following requirements must be met by the individual—
- Such US citizens must be outside the US for 330 days in any one year period; or
- They must be a bona fide resident of any foreign nation for a period that includes a US tax year(full tax year).
What should a qualifying individual do?—Well, in such a scenario, US citizens can claim the money earned outside the US during that period as a tax exemption on their federal income tax.
However, you must file a US income tax return each year.