Foreign Earned Income Exclusion & Housing Cost Exclusion

US Tax Consequences of US Citizens Working in a Foreign Country - Expatriates

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David M. Kaufmann, CPA

Voice: 720.493.4804

Email: contact2@kaufmann-cpa.com

Physical Address:

2831 Wyecliff Way
Highlands Ranch, CO 80126

Mailing Address:

PO Box 632285
Highlands Ranch, CO 801
63-2285

US Income Tax Consequence Of Being An Expatriate

There are broad tax consequences for working abroad:

  • The Foreign Earned Income Exclusion might eliminate some or all of your expatriate income from you 1040 Form.
  • The Foreign Housing Cost Exclusion might reduce a portion of employer paid housing expenses.
  • Extension for filing income tax returns

Foreign Earned Income Exclusion

For 2003 taxes, the maximum Foreign Earned Income Exclusion is $80,000.

If you qualify for this exclusion, you would need to include an election in your tax return and file either Form 2555 or Form 2555 EZ.

Your "tax home" must be outside the US. However, you family can still reside in the US.

You must meet the bona fide foreign residence test or the foreign physical presence test.

If you qualify for the Foreign  Earned Income Exclusion, you can stop US tax withholding by filing Form 673 with your employer.

Foreign Housing Cost Exclusion

Some or all your employer paid foreign housing costs may be excluded from US income tax.

Housing costs include reasonable, but not "extravagant" costs. Housing costs could include rent, insurance, the fair rental value of housing, utilities, etc.

There might be limits on the Foreign Housing Cost Exclusion. This limit could change.

Extended Filing Deadlines For Returns With The Foreign Earned Income Exclusion

Generally, for taxpayers that qualify, the filing due date for expatriate returns that qualify for the Foreign Earned Income Exclusion is June 30.

File IRS Form 2350 to request the extended deadline.

For questions: "contact AT kaufmann-cpa.com"