If you are a United States citizen or a resident alien who lives
and works abroad, you may qualify to exclude all or part of your foreign
earnings from your income. If you are a U.S. citizen with a tax home in
a foreign country and you meet the bona fide residence test or physical
presence test, you may exclude up to $72,000 of foreign earned income for
tax year 1998. The $72,000 exclusion amount will increase by $2,000 a year
until it reaches $80,000 in the year 2002 and thereafter. Resident aliens
with a tax home in a foreign country may be eligible for the exclusion
if they meet the physical presence test, or if they are citizens or nationals
of a country with which the United States has an income tax treaty and
meet the bona fide residence test. Specific guidelines for these two tests
are covered in Topic 854. The maximum annual exclusion
is prorated on a daily basis if there is any part of your year that you
do not qualify under either test.
If you qualify under either test, you may also claim an additional
exclusion or deduction, based upon what you spend for foreign housing.
The foreign earned income exclusion and the foreign housing exclusion or
deduction are figured on Form
2555, which you attach to Form
1040. However, if you claim only the foreign earned income exclusion,
you may be able to use Form
If you would like more information on who qualifies for the exclusion,
select Topic 854. For more information on what
type of income qualifies for the exclusion, select Topic
855. Publication 54, Tax
Guide for U.S. Citizens and Resident Aliens Abroad, can be downloaded
from this site, or ordered by calling 1-800-829-3676.
If the information you need relating to this topic is not addressed
in Publication 54, you may call
the IRS National Office hotline. The number is area code (202) 874-1460.
This is not a toll-free number.
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