Use the Foreign Earned Income Exclusion to Save More on your US Taxes
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US expats can deduct $97,600 of foreign income from their 2013 US tax return with the Foreign Earned Income Exclusion if they qualify as an official expat. (This amount jumps to $99,200 in 2014.) To qualify as a US expat, you must pass one of two determining residency tests: The Physical Presence test (PPT) or the Bona Fide Residence test (BFR). With the PPT, you must be outside the US for 330 of any 365-day period and earn foreign income. To qualify via the BFR, you must reside outside of the US for at least one year and have no intentions of returning to the US permanently. When you qualify via the PPT (which most expats do) you should plan your trips to the US carefully, calculating the exact number of days you are in the US and abroad. If you are in the US for even 331 days in a year, you lose this deduction—and it could cost you thousands!
Note that this deduction is not automatic—you must file Form 2555 to apply.
Submitted on Jun 09, 2014 - Category: Expat Finance
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GreenbackExpatTaxServices
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David is an IRS Enrolled Agent, an MBA and an experienced finance professional and entrepreneur. David and his wife, Carrie, were frustrated with the process of filing their expat taxes. They found plenty of accountants, but few who could accurately prepare expat taxes. There were expensive accountants who treated them like a number and US CPAs who were well meaning, but not up to date on the rules as they apply to expats. Together they decided there had to be a better way. So they created the kind of company they wanted to work with - and Greenback Expat Tax Services was born!
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