Qualifying for expat tax benefits

So one of the benefits of working oversea is the expat tax benefits that you’re allow to receive if you meet a certain requirement. This benefit is known as Foreign Earned Income Exclusion.

According to the IRS, the requirements to qualify for this benefits are:

To claim the foreign earned income exclusion, the foreign housing exclusion, or the foreign housing deduction, you must have foreign earned income, your tax home must be in a foreign country, and you must be one of the following:

  • A U.S. citizen who is a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax year,
  • A U.S. resident alien who is a citizen or national of a country with which the United States has an income tax treaty in effect and who is a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax year, or
  • A U.S. citizen or a U.S. resident alien who is physically present in a foreign country or countries for at least 330 full days during any period of 12 consecutive months.

Since I qualify for the expat tax benefits I am allowed to exclude some of my income for every year depends on how long I will be working oversea. The foreign earned income exclusion is index to inflation every year:

Maximum amount I can exclude:

2011 - $92,900 (This was my first year working oversea. I was only qualifying for a certain amount since I started at the end of the year.)

2012 - $95,100

2013 - $97,600

2014 - $99,200

This benefit helps me a lot since I am considered a HCE (Highly Compensated Employee), without this benefit my tax rate will be push up to 33%+ tax bracket. By qualifying for this benefit I am able to exclude $99,200 for 2014 which helps a lot, and put me @ a 28% tax bracket.

2014 Tax bracket

Not only do  I qualify for the Foreign Earn Income Exclusion, I contribute fully to my 401k since it is tax deferral it may lower my tax bracket further, but will vary because my income fluctuate depend how many vacation I take and if we have special project that allow overtime. I use itemized deduction on my taxes. I am planning to volunteer abroad this year and the organization I picked will qualify for charity tax deduction. As you can see I am trying to maximize and take advantage of any tax benefits that I am allowed to take.

I am no tax expert so consult with your tax professional for further assistance.

Are you working as an expat and qualify for the tax benefit?





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