TORONTO, May 16, 2022 /PRNewswire/ — The U.S. is one of a few countries in the world operating on a citizenship based taxation basis, meaning that U.S. citizens are taxed on their worldwide income regardless of where they live.
While this is a clear disadvantage to U.S. citizens living overseas, many such U.S. citizens don’t actually have U.S. tax owing due to several mechanism, one of which is the foreign tax credit, the other one is the Foreign Earned Income Exclusion (FEIE).
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One advantage of the Foreign Earned Income Exclusion (FEIE) is that it doesn’t actually require the taxpayer to have paid taxes to a foreign country.
There are two ways to qualify for the Foreign Earned Income Exclusion (FEIE):
– The Bona Fide Residence test: It would require you to be an actual resident of a foreign country or
– The physical presence test: It would require you to be in a foreign country for at least 330 days in any 12-month period.
As with many tax rules, the Foreign Earned Income Exclusion (FEIE) is more complex than the two-line summary above. Please check 1040 Abroad’s authoritative guide on the Foreign Earned Income Exclusion (FEIE) guide using this link to know everything there is to know about the Foreign Earned Income Exclusion (FEIE).
1040 Abroad is a tax firm founded in 2012, consisting of a unique international team that is led by a U.S. expat.
Always having our client’s best interests in mind, we work hard to make sure that U.S. expats become tax compliant and live their life abroad free of any hassle.
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SOURCE 1040 Abroad
