digest
Short Summary
Key Points
- The FEIE lets qualifying expats exclude a portion of foreign earned salary from U.S. taxation, and the exclusion applies per person.
- Mechanically, the income is added to the tax return and then subtracted out, which is why Form 2555 must be included with Form 1040.
- Short overseas trips do not qualify; the expat must be living abroad on a permanent or indefinite basis.
- The physical presence test is a strict day count: 330 days abroad in any rolling 12-month period, meaning no more than 35 days in the United States.
- The bona fide residence test requires living overseas with intent to stay indefinitely or permanently and being a resident for a full calendar year.
- Spouses who live overseas each get their own exclusion limit, which can significantly increase the total savings.
Details Worth Noting
- Concrete instructions:
- Confirm eligibility first by choosing one test: physical presence (at least 330 days in a foreign country within a rolling 12-month period, with no more than 35 days in the U.S.) or bona fide residence (established residence in a foreign country for a full January 1 to December 31 calendar year).
- When filing, attach Form 2555 to Form 1040 to claim the exclusion.
- If a special extension is needed to file, use Form 2350 to request it.
- Seek professional help if a special extension is needed, since filing may be delayed by up to two years in some cases depending on when the move abroad and bona fide residence claim occur (an outer possibility, not a guarantee).
- The speaker notes the bona fide residence test depends on the move date, so timing of relocation affects when the return can be filed.
- Exclusion amounts were not stated in the transcript, so the exact dollar limit should be checked separately.
- This is tax information as reported by the speaker, not professional tax advice; qualification rules and filing deadlines should be verified with a qualified tax professional.
Bottom Line
Whether the FEIE saves money depends mainly on whether a person can clearly satisfy one of the two residency tests, so the day count or the calendar-year residency should be documented from the start.
