Download - US Expariate Tax Break
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US Expatriate Tax Break
Foreign Earned Income Exclusion
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To claim the foreign earned income exclusion the taxpayer must
• Have foreign earned income
• Have a tax home in a foreign country
• Meet one of two tests: – the bona fide resident test – the physical presence test
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Have foreign earned income
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Income
Earned• Salaries• Wages• Commission• Bonuses• Professional fees• Tips
Unearned• Interest• Dividends• Capital gains• Gambling winnings,• Alimony• Social Security benefits • Pensions• Annuities
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Foreign Earned Income
US Source Foreign Source
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Foreign earned income excludable up top
• 2012: $95,100
• 2011: $92,900
• 2010: $91,500
• 2009: $91,400
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Employees of the US GovernmentCivilian & Military Compensation
US Source Income Regardless of the country were work was performed
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Have a tax home in a foreign country
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Regular or Principle Place ofBusiness, Employment, Post of Duty
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United States
Any territory under the sovereignty of the United States
The 50 states and the District of Columbia
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Territories and Possessions of the United States
Puerto Rico
US Virgin Islands
American SamoaGuam
Northern Marianna Islands
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Foreign Country
Any territory under the sovereignty of a government other than that of
the United States
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Not Recognized as a Foreign Country
Locations not under the sovereignty of any government
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International Waters
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Antarctic Region
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Orbiting the Earth
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And Beyond
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Bona Fide Residence Test
Residence is in a foreign country or countries for an indefinite amountof time covering an entire calendar year from January 1 to December 31
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Physical Presence Test
Physically present in a foreign country for a period of 330 full days, from midnight to midnight, in a 12 month period
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To claim the foreign earned income exclusion the taxpayer must
• Have foreign earned income
• Have a tax home in a foreign country
• Meet one of two tests: – the bona fide resident test – the physical presence test