Expatriate Foreign Earned Income Exclusion for 2016 Increased

The foreign earned-income exclusion amount under tax code Section 911(b)(2)(D)(i) will increase in 2016 to $101,300 from $100,800, the International Revenue Service said Oct. 21 (Rev. Proc. 2015-53).

Section 911 allows qualified U.S. citizens and residents who work abroad to exclude a certain amount of their foreign-earned income and a portion of their foreign housing expenses from their gross income for U.S. tax purposes. They must meet either a physical presence test or a bona fide residence test. Taxpayers may elect the Section 911 income and housing exclusions even if no foreign taxes were paid on their foreign earnings.

Although employers generally must withhold U.S. federal income taxes from taxable wages paid to U.S. citizens and residents working abroad, the withholding requirements do not apply to wage payments subject to the foreign earned-income and housing cost exclusions claimed by expatriate employees that file Form 673, Statement for Claiming Exemption From Withholding on Foreign Earned Income Eligible for the Exclusion(s) Provided by Section 911, with the employer.