Advice

If you’re an expat and looking for some tax advice and help, keep reading! Being overseas adds an extra layer of difficulty come tax time. We’re here to hopefully alleviate some of that burden for you. We’ll touch on a few key questions that come up a lot.

Foreign Earned Income Exclusion

We’re going to dive right in with the biggest question we come across. The Foreign Earned Income Exclusion (FEIE).

First, we need to address what foreign earned income is. Foreign earned income is income earned while abroad. The source/location of that income doesn’t matter. For example, if you live in Madrid, Spain and have a US-based employer paying you, that’s considered foreign income.

Next, we have to figure out if you qualify for the FEIE. There are two ways to qualify. The substantial presence test (330 days outside the US, not including international waters), and the bona-fide residence test (you pay taxes on your income to local taxing authorities).

Lastly, we need to clear up some confusion about this income exclusion. If you are self-employed, you are still able to claim this exclusion, BUT, it does NOT apply toward your self-employment (SE) taxes. You still have to pay those! One tax strategy to legally reduce/lower SE taxes is to create an S-corp. Don’t undertake this route lightly! It’s not as easy most websites make it out to be. Check out our article on S-corps.

Reach Out

Another aspect of expat taxes we come across is getting help from someone knowledgeable. Reach out to us! You can email me, personally, at Chad@YourTaxPrep.com. Also, feel free to use our Contact Us form.

Didn’t quite find what you were looking for in this article? Send us an email. We’re always adding new material. We look forward to hearing from you!