US Expatriate Tax Break

Foreign Earned Income Exclusion

To claim the foreign earned income exclusion the taxpayer must

• Have foreign earned income

• Have a tax home in a foreign country

• Meet one of two tests: – the bona fide resident test – the physical presence test

Have foreign earned income

Income

Earned• Salaries• Wages• Commission• Bonuses• Professional fees• Tips

Unearned• Interest• Dividends• Capital gains• Gambling winnings,• Alimony• Social Security benefits • Pensions• Annuities

Foreign Earned Income

US Source Foreign Source

Foreign earned income excludable up top

• 2012: $95,100

• 2011: $92,900

• 2010: $91,500

• 2009: $91,400

Employees of the US GovernmentCivilian & Military Compensation

US Source Income Regardless of the country were work was performed

Have a tax home in a foreign country

Regular or Principle Place ofBusiness, Employment, Post of Duty

United States

Any territory under the sovereignty of the United States

The 50 states and the District of Columbia

Territories and Possessions of the United States

Puerto Rico

US Virgin Islands

American SamoaGuam

Northern Marianna Islands

Foreign Country

Any territory under the sovereignty of a government other than that of

the United States

Not Recognized as a Foreign Country

Locations not under the sovereignty of any government

International Waters

Antarctic Region

Orbiting the Earth

And Beyond

Bona Fide Residence Test

Residence is in a foreign country or countries for an indefinite amountof time covering an entire calendar year from January 1 to December 31

Physical Presence Test

Physically present in a foreign country for a period of 330 full days, from midnight to midnight, in a 12 month period

To claim the foreign earned income exclusion the taxpayer must

• Have foreign earned income

• Have a tax home in a foreign country

• Meet one of two tests: – the bona fide resident test – the physical presence test