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More FAQ's Regard Taxes for American's Abroad (Vienna)


Here are two more frequently asked questions from American's living abroad. I know that some of the answers may seem to cause even more confusion--feel free to post any questions you have and I will be glad to clarify.

Question: What is foreign earned income? Is it income from a foreign source or income paid by a U.S. company while living abroad?

Answer: Earned income is pay for personal services performed, such as wages, salaries, or professional fees. Foreign earned income is income you receive for services you perform in a foreign country during a period when your tax home is in a foreign country and during which time you meet either the residence test or the physical presence test. It does't matter whether the income is paid by a U.S. employer or a foreign employer. The following income would be excluded:

• The previously excluded value of meals and lodging furnished for the convenience of your employer.
• Pension or annuity payments including social security benefits.
• Payments by the U.S. Government, or any U.S. government agency to employees
• Amounts included in your income because of your employer's contributions to a nonexempt employee trust or to a nonqualifying annuity contract.
• Recaptured unallowable moving expenses
• Payments received after the end of the tax year following the tax year you earned the income.

Question: Do I have to meet the Protected content physical presence test or have a valid working resident visa to be eligible for the foreign earned income exclusion?

Answer: To claim the foreign earned income exclusion, the foreign housing exclusion, or the foreign housing deduction:
• You must have foreign earned income,
• Your tax home must be in a foreign country, and
• You must be one of the following:
• A U.S. citizen who is a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax year,
• A U.S. resident alien who is a citizen or national of a country with which the United States has an income tax treaty with a nondiscrimination article in effect and who is a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax year, or
• A U.S. citizen or resident alien who is physically present in a foreign country or countries for at least Protected content days during any period of 12 consecutive months.
• U.S. tax law does not specifically require a foreign resident visa or work visa for this purpose, but you should comply with the foreign country's laws.

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