What is the overseas tax exemption?

The Foreign Earned Income Exclusion (FEIE, using IRS Form 2555) allows you to exclude a certain amount of your FOREIGN EARNED income from US tax. For tax year 2021 (filing in 2022) the exclusion amount is $108,700.

Who qualifies for foreign income exclusion?

To be eligible for the foreign income exclusion, an expatriate must meet all four of the following requirements:

Must have foreign earned income.
Must have a tax home in a foreign country.
Meet either the bona fide residence test or physical presence test.
Make a valid election to exclude foreign earned income.

Do I have to pay taxes if I live abroad?

Yes, if you are a U.S. citizen or a resident alien living outside the United States, your worldwide income is subject to U.S. income tax, regardless of where you live. However, you may qualify for certain foreign earned income exclusions and/or foreign income tax credits.

How can I avoid paying U.S. taxes abroad?

Based on the current US tax laws, the only way to avoid filing a US tax return and paying US taxes abroad is to renounce US citizenship.

Do US citizens pay taxes on foreign income?

Yes, U.S. citizens have to pay taxes on foreign income if they meet the filing thresholds, which are generally equivalent to the standard deduction for your filing status. You may wonder why U.S. citizens pay taxes on income earned abroad. U.S. taxes are based on citizenship, not country of residence.

Do I have to file taxes if I live abroad?

Do I still need to file a U.S. tax return? Yes, if you are a U.S. citizen or a resident alien living outside the United States, your worldwide income is subject to U.S. income tax, regardless of where you live. However, you may qualify for certain foreign earned income exclusions and/or foreign income tax credits.

What is the tax exemption for Foreign Missions?

This level of exemption is set by OFM on the basis of reciprocity, determined by the tax relief privileges enjoyed by the U.S. Mission and personnel in that foreign country. Foreign missions interested in discussing improvements to their tax exemption benefits are encouraged to contact OFM.

What is a diplomatic tax exemption card?

Diplomatic tax exemption cards that are labeled as “Personal Tax Exemption” are used by eligible foreign mission members and their dependents to obtain exemption from sales and other similarly imposed taxes on personal purchases in the United States.

What is the foreign earned income exclusion?

Foreign Earned Income Exclusion. If you are a U.S. citizen or a resident alien of the United States and you live abroad, you are taxed on your worldwide income. However, you may qualify to exclude from income up to an amount of your foreign earnings that is adjusted annually for inflation ($92,900 for 2011, $95,100 for 2012, $97,600 for 2013,…

What is the maximum amount of foreign income I can exclude?

However, you may qualify to exclude from income up to an amount of your foreign earnings that is adjusted annually for inflation ($92,900 for 2011, $95,100 for 2012, $97,600 for 2013, $99,200 for 2014 and $100,800 for 2015).