Did you know that people who live and work outside of the U.S. have the privilege to be excluded from federal income taxes that are paid by their employer for housing? In the same way, individuals of the same standing may exempt from taxes through the foreign-earned income exclusion.
We understand that not everyone is aware of the exclusions and deductions for foreign-earned income and housing. As one of your FATCA consultants in Reston, VA, US International Tax Advisors is here to help. Here are some things you need to know about foreign-earned income and housing:
Who are qualified for the exclusions and deductions?
In terms of foreign-earned income, the provision qualifies U.S. citizens or residents that live abroad with taxed incomes. Still, according to the IRS, some individuals may qualify, given that they have up to $99,200 of foreign earnings. Additionally, you can claim either a deduction or exclusion for housing, through physical presence and bona fide residence tests.
What are the requirements for claiming the exclusions and deductions?
The requirements in claiming foreign-earned income exclusion and foreign housing exclusion and deductions include a taxed home that must be in a foreign country and a foreign-earned income. A person is qualified for the exclusions and deductions if 1) they are a U.S. citizen who resides in a foreign country with an uninterrupted remittance of a full tax year, 2) they are a U.S. citizen or a resident alien who is in a foreign country for no less than 330 days for 12 succeeding months, or 3) they are a U.S. resident alien who is a national or citizen of a certain country in which the U.S. has an income tax treaty.
Which forms should you fill out when claiming exclusions and deductions?
For individuals who are claiming the foreign-earned income exclusion, you should file Form 2555 or Form 2555-EZ. For those who are claiming foreign housing exclusion or deduction, you should only use Form 2555.
To learn more about foreign-earned income and housing deductions and exclusions, get in touch with your local tax advisers, such as US International Tax Advisors. We help individuals and companies alike in their tax and compliance issues, as well as IRS voluntary disclosure program for tax payers in Reston, VA, the Metro DC area, nationwide and globally.
Our counsel on offshore account reporting and international tax compliance is current and very effective. Just give us a call at (844) 796-8565 to get started.
