When it comes to overseas tax exemptions, if you’re a U.S. citizen working abroad, you must file a U.S. tax return if you meet the filing threshold. Otherwise, you can qualify for the Foreign Earned Income Exclusion.
You may be able to exclude up to $101,300 in foreign earned income, as long as it meets specific requirements. Example: the exclusion does not apply to passive income such as interest and dividends.
If you made less than $10,350 in 2016 and file as single taxpayer, you do not have to file a U.S. tax return. However, if you made more than $10,350, you may qualify for the exclusion on your U.S. tax return.
It’s not automatic. To qualify for any overseas tax exemption, you’ll need to file a U.S. tax return, and you can only claim the exclusion if you file Form 2555 with your return – even if all of your foreign earned income is excludible.
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