Ernst & Young Tax Guide 2018, 33rd Edition

Chapter 42 U.S. citizens working abroad: Tax treatment of foreign earned income

1. How To Qualify for the Foreign Earned Income Exclusion
2. The Foreign Earned Income Exclusion
3. The Foreign Housing Exclusion
4. Employer-Provided Meals and Lodging
5. Foreign Tax Credit

Note

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Introduction

U.S. citizens and resident aliens are taxed on their worldwide income regardless of where it is earned, paid, or received. But U.S. citizens living abroad get certain tax benefits that are not available back home. Employees and self-employed individuals living abroad may elect to exclude up to $102,100 of their foreign-earned income from taxation in 2017. Employees and self-employed individuals may also exclude or deduct part of their housing costs from taxable income. This chapter tells you about the tax benefits you get from living abroad and what you have to do to qualify for them.

How To Qualify for the Foreign Earned Income Exclusion

You qualify for the foreign earned income exclusion if you are a U.S. citizen, you have a tax home in a foreign country, and you meet either the foreign residence test or the physical presence test, described below.

Generally, if you are a resident alien of the United States, you may qualify for the foreign earned income exclusion if ...