International Tax

Foreign Earned Income Exclusion

The foreign earned income exclusion is a rule that may let qualifying taxpayers exclude certain foreign earned income from US taxation, subject to annual limits and residency tests.

Quick answer

The foreign earned income exclusion is a rule that may let qualifying taxpayers exclude certain foreign earned income from US taxation, subject to annual limits and residency tests.

It matters because expats often need to compare it with the foreign tax credit rather than assuming both should be used the same way.

A US citizen working abroad may qualify to exclude part of earned income if the residency rules are met.

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Plain-English Definition

What Foreign Earned Income Exclusion means

The foreign earned income exclusion is a rule that may let qualifying taxpayers exclude certain foreign earned income from US taxation, subject to annual limits and residency tests.

Why it matters It matters because expats often need to compare it with the foreign tax credit rather than assuming both should be used the same way.
Simple example A US citizen working abroad may qualify to exclude part of earned income if the residency rules are met.
Related Questions

Questions people ask about Foreign Earned Income Exclusion

What does Foreign Earned Income Exclusion mean?

The foreign earned income exclusion is a rule that may let qualifying taxpayers exclude certain foreign earned income from US taxation, subject to annual limits and residency tests.

Why does Foreign Earned Income Exclusion matter?

It matters because expats often need to compare it with the foreign tax credit rather than assuming both should be used the same way.

What is a simple example of Foreign Earned Income Exclusion?

A US citizen working abroad may qualify to exclude part of earned income if the residency rules are met.

When should I ask a CPA about Foreign Earned Income Exclusion?

Ask a CPA when the term affects foreign reporting, double taxation, expat filing, or account disclosure rules.

How is Foreign Earned Income Exclusion different from Foreign Tax Credit?

Foreign Earned Income Exclusion means The foreign earned income exclusion is a rule that may let qualifying taxpayers exclude certain foreign earned income from US taxation, subject to annual limits and residency tests. Foreign Tax Credit means The foreign tax credit is a credit that may reduce US tax when income has already been taxed by a foreign country. The difference is that they apply to different tax, accounting, or business situations and should not be treated as interchangeable.

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