Aliens and U.S. Citizens Living Abroad:
U.S. Citizens Overseas
This is archived information that pertains only to the 2005 Tax Year. If you
are looking for information for the current tax year, go to the Tax Prep Help Area.
I am a U.S. citizen working abroad. Are my foreign earnings taxable?
A U.S. citizen or resident alien is generally subject to U.S. tax on total
worldwide income. However, 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 earned income. For specific information, refer to Tax Topic 853, Foreign Earned Income Exclusion - General.
If you would like more information on who qualifies for the exclusion,
refer to Tax Topic 854, Foreign Earned Income Exclusion - Who Qualifies.
For more information on what type of income qualifies for the exclusion, refer
to Tax Topic 855, Foreign Earned Income Exclusion - What Qualifies.
You may also wish to refer to chapter 4 Publication 54, Tax Guide
for U.S. Citizens and Resident Aliens Abroad, for a detailed discussion.
If the information you need relating to this topic is not addressed in
Publication 54, you may call the IRS International Tax Law hotline. The number
is (215) 516-2000. This is not a toll-free number.
I am a U.S. citizen working for a U.S. firm in a foreign country.
Is any part of my wages or expenses tax deductible?
U.S. citizens are taxed on their worldwide income, no matter where they
work. Some taxpayers may qualify for the foreign earned income exclusion,
foreign housing exclusion, or foreign housing deduction, if their tax home
is in a foreign country and they are either a bona fide resident of a foreign
country or countries for an uninterrupted period that includes an entire tax
year, or are physically present in a foreign country or countries for at least
330 full days during any period of 12 consecutive months. If the taxpayer
is temporarily away from his or her tax home in the United States on business
(less than a year), the taxpayer may qualify to deduct away from home expenses
(for travel, meals, and lodging ) but would not qualify for the foreign earned
income exclusion.
I am a U.S. citizen living and working overseas. Can I have a tax
credit on my U.S. taxes for the taxes I pay to the foreign country?
The foreign tax credit is intended to relieve U.S. taxpayers of the double
tax burden when their foreign source income is taxed by both the United States
and the foreign country from which the income is derived.
Generally, only income taxes paid or accrued to a foreign country or a
U.S. possession qualify for the foreign tax credit. You can choose to take
the amount of any qualified foreign taxes paid or accrued during the year
as a foreign tax credit or as an itemized deduction.
To choose the foreign tax credit you must generally complete Form 1116 (PDF), Foreign Tax Credit and attach
it to your Form 1040 (PDF). You may claim credit
without attaching Form 1116 if all of your foreign source income is passive
income (such as interest and dividends) reported to you on a payee statement
and the total amount of qualifying foreign taxes you paid or accrued is not
more than $300 ($600 in the case of a joint return) and is also reported to
you on a payee statement. To choose the deduction, you must itemize deductions
onForm 1040, Schedule A (PDF) .
You may not take either a credit or a deduction for taxes paid or accrued
on income you exclude under the foreign earned income exclusion or the foreign
housing exclusion. There is no double taxation in this situation because the
income is not subject to U.S. tax.
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