How much foreign earned income is tax-free?

Escape Uncle Sam’s Reach: The Foreign Earned Income Exclusion in 2023 and Beyond

Working abroad can be an incredible experience, filled with new cultures, opportunities, and, of course, income. But for US citizens and Green Card holders, navigating the complexities of US taxes on foreign earnings can dampen the adventure. Thankfully, the Foreign Earned Income Exclusion (FEIE) exists to ease the burden.

Here’s the breakdown for 2023 and 2024:

• 2023: Qualifying individuals can exclude up to $120,000 of their foreign earned income from US taxes.
• 2024: This exclusion increases to $126,500 per person.

Important Considerations:

• Actual Earnings: The exclusion is limited to your actual foreign earnings. You can’t exclude more income than you actually earn abroad.
• Eligibility Criteria: Not everyone working overseas qualifies. You must meet either the Physical Presence Test (being physically present in a foreign country for at least 330 days out of a 12-month period) or the Bona Fide Residence Test (establishing residency in a foreign country for an uninterrupted tax year).
• Additional Benefits: Beyond the FEIE, you may also qualify for other tax benefits like the Foreign Tax Credit, which helps avoid double taxation on foreign income.

Planning Ahead is Key:

Understanding the intricacies of the FEIE and other international tax provisions is crucial. Don’t leave your tax planning until the last minute. Consult with a qualified tax professional specializing in international taxation to develop a tailored strategy that maximizes your financial benefits.

Embrace the Opportunity, Minimize the Tax:

Working abroad offers a unique opportunity for personal and professional growth. By understanding the FEIE and planning strategically, you can enjoy your international adventure while minimizing your US tax liability.