Foreign Earned Income Exclusion & Foreign Housing Exclusion Explained

Foreign Earned Income Exclusion & Foreign Housing Exclusion or Deduction: What Does It Mean | US Taxes for Expats

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00:00 - Foreign Earned Income Exclusion & Foreign Housing Exclusion
01:20 - What is not foreign earned income
02:18 - Foreign Earned Income Exclusion qualifications
03:20 - Foreign Housing Exclusion or Deduction
04:25 - How much is the foreign housing exclusion or deduction
05:16 - Foreign housing expenses
05:45 - Foreign Tax Credit

TRANSCRIPT:
So, what does the foreign earned income exclusion mean when it comes to US taxes for expats? What about the foreign housing exclusion or deduction? Well, it's possible that you may be able to exclude some of your foreign earned income from being taxed in the US if it's income from wages, salaries, professional fees, or personal services that you provided. You also may be able to claim an exclusion or a deduction from gross income for your foreign housing amount if your tax home is in a foreign country. If you live or work abroad, the foreign earned income exclusion and the foreign housing exclusion or deduction are tax breaks that could help legally reduce your US federal tax bill.

US citizens and US resident aliens have to pay US federal income taxes on all of their income no matter where it’s earned. As an American expat, this could mean that you are being double taxed because you are being taxed both in the US and in the country where the income is earned.

If you take the foreign income exclusion or deduction and you still have leftover foreign income that cannot be excluded, you should think about taking a foreign tax credit on the amount that CANNOT be excluded. The foreign tax credit can be used to offset income tax paid abroad and can be used on earned and unearned income, such as dividends and interest. There are no restrictions on the amount of foreign income that can be used to claim a foreign tax credit and you do not have to prove your residence in an overseas location.

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