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March 3, 2013

Everything You Wanted to Know about the Foreign Earned Income Exclusion (IRS Form 2555)

One of the best tax benefits in the tax code is the foreign earned income exclusion.  If you live abroad in a no tax or low tax jurisdiction it allows you to save many thousands of dollars in US income taxes.

If you meet certain requirements, you may qualify for the foreign earned income and foreign housing exclusions and the foreign housing deduction.

If you are a U.S. citizen or a resident alien of the United States and you live abroad, you are taxed on your worldwide income. However, you may qualify to exclude from income up to an amount of your foreign earnings that is now adjusted for inflation ($91,400 for 2009, $91,500 for 2010, $92,900 for 2011, $95,100 for 2012). In addition, you can exclude or deduct certain foreign housing amounts.
You may also be entitled to exclude from income the value of meals and lodging provided to you by your employer. Refer to Exclusion of Meals and Lodging in Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad, and Publication 15-B, Employer's Tax Guide to Fringe Benefits for more information.

If you live in a foreign country where you must pay foreign income taxes, you can avoid double taxation by taking foreign tax credits which offset your US tax on that foreign income dollar for dollar.  We have over 30 years experience in assisting US expatriates, green card holders and nonresidents pay the lowest US income taxes possible. We can often help you avoid having to pay US state taxes also.  Email us at or visit our websites at or 

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