Foreign Earned Income Exclusion

Foreign Earned Income Exclusion

If an individual meets the criteria for foreign income exclusion, they can enjoy this tax benefit. This exclusion also entails the foreign housing exclusion and the foreign housing deduction. To enjoy the benefits, you will need foreign earned income and taxes paid to another foreign country. You must so adhere to the following requirements: 

  • Be an American citizen that is a legal resident in another country (or country) for a continual period, including the whole tax year.


  • Must be an American resident who is also a citizen of a country where the USA has an effective peace treaty. You must also be an occupant in a country for an entire period, including a whole tax year. 

  • An American citizen or resident alien who is present in a foreign country for 330 days within any 12 successive months. 

Maximize the Interactive Tax Assistant platform, by the IRS which seeks to help ascertain if the income earned in another country is qualified to be removed from income declared on your American income tax returns. 

As an American that lives abroad, you will be taxed based on your global income. You could qualify to remove all foreign income from your payment to the amount which is yearly adjusted for inflation: 

  • It was $103,900 in 2018

  • It was $105,900 in 2019

  • It was $107,600 in 2020

  • It was $108,700 in 2021

You can remove or subtract some foreign housing sums. You can also subtract from the income value of things like food and lodging if your employer offers them to you, so life is more straightforward. But such amounts of money are not “Foreign gross income.” 

There are also other rules which include: 

  • The foreign-earned income

This refers to money you earned while in a foreign country, such as salaries, wages, and other fees. But it does not comprise the amounts of money you get for personal use, mainly if a company provides for it.

An individual who qualifies could be able to claim foreign income exclusion on their self-employment monies. The excluded monies will reduce the steady income tax nonetheless and will not lessen the self-employment levy. More so, as an entrepreneurial person, you could be qualified to take the federal housing deduction instead of the foreign housing exclusion. 

  • Not foreign earned income 

Foreign earned monies don’t include payment received as a civilian or military worker of the American government or other agencies. It also doesn’t cost services conducted in international waters and airspace (this shouldn’t be in another country).

Your foreign income earned income also doesn’t include all payments received at the end of the tax year after the service or product was used. You don’t have to include excludible from your income, like the worth of foods eaten and furnishings. Your pension and social security advantages are not included. 

You most certainly have a foreign tax house if you work in another country and wish to be employed permanently instead of having temporary work. If you don’t have a foreign tax house, then the location is in America. 

Additionally, suppose you are qualified and claimed the foreign made money exclusion with the foreign house exclusion or both. In that case, you have to find out the tax of the remaining non-excluded revenue with tax rates. These will apply if you don’t claim the exclusion.


There are many things to learn about taxes, but you’ve got to take it one at a time, so you don’t get confused about what is expected of you. With this article, you are ready to read more about your taxes, mainly the foreign earned income exclusion.



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