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Listener Mack Hackett was the Most Engaged Listener on the Popcorn Finance Anchor Station for four days in a row. For this amazing feat I promised Mack an episode based around the topic of his choice.
Of course Mack hit me with a topic that I knew nothing about, the Foreign Earned Income Exclusion. So I brought is Megan Brinsfield, Director of Financial Planning at Motley Fool Wealth Management, to help break down what the FEIE is all about.
Follow Megan at @CertifiablePF
Foreign Earned Income Exclusion – What is it?
- Exclude up to $104,100 (in 2018, adjusted for inflation) of your earned income from taxation
- Unearned income is not eligible (withdrawals from retirement accounts, pensions, capital gains, rental income)
- You also may qualify to exclude housing costs from taxation if you pay for housing from “employer provided amounts”
- There is a floor and a ceiling on housing costs, based on location
How to qualify
Mainly for expats working abroad as an employee of a company, but self-employment counts too.
- Establish a tax home in another country
- Be physically in a foreign country (or countries) for a year
- Two methods
- Physical presence test (330/365 days)
- Bona Fide Residence test (calendar year)
- Two methods
- Does not apply if you are an employee of the federal government
How to claim it
- Form 2555 to claim the exclusion
- Form 2350 to file for an extension in order to meet one of the tests
Where to get more info
- IRS Publication 54 – https://www.irs.gov/forms-pubs/about-publication-54
- Google search “Expat tax blogs” – there are a bunch of good ones
Apps to track days out of the country
Most of these types of apps use the phone’s GPS to provide an audit log
- Moneo (Google and iPhone) https://monaeo.com
- Tracking Days (iPhone only) http://www.trackingdays.com
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