Aliens and U.S. Citizens Living Abroad

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Frequently Asked Tax Questions

Aliens and U.S. Citizens Living Abroad - U.S. Citizens Overseas

I am a U.S. citizen working for a U.S. firm in a foreign country. Is any part of my wages or expenses tax deductible?
I am a U.S. citizen living and working overseas. Can I have a tax credit on my U.S. taxes for the taxes I pay to the foreign country?

Rev. date: 08/04/2012

Foreign Country

Foreign Earned Income

Foreign Earned Income Exclusion

Tax Guide for U.S. Citizens and Resident Aliens Abroad

U.S. Citizens and Resident Aliens Abroad

U.S. citizens and resident aliens are taxed on their worldwide income.
Some taxpayers may qualify for the foreign earned income exclusion and foreign housing exclusion, or foreign housing deduction, if:
     o Their tax home is in a foreign country,
      o They are U.S. citizens who are a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax year,
      o They are U.S. resident aliens who are a citizen or national of a country with which the United States has an income tax treaty with a nondiscrimination article 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
     o They are U.S. citizens and resident aliens who are physically present in a foreign country or countries for at least 330 full days during any period of 12 consecutive months.
Taxpayers may be able to claim a foreign tax credit if required to pay a foreign income tax to the foreign country, if he or she has not elected the foreign earned income exclusion with respect to that income.
Taxpayers may also qualify to deduct away from home expenses (for travel, meals, and lodging), but not against excluded income.

Additional Information

Form 2555EZ (PDF), Foreign Earned Income Exclusion Tax Topic 514, Employee Business Expenses Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad Form 1116 (PDF), Foreign Tax Credit Publication 463, Travel, Entertainment, Gift and Car Expenses Form 2555 (PDF), Foreign Earned Income Publication 514, Foreign Tax Credit for Individuals

Rev. date: 08/04/2012

Foreign Country

Foreign Tax Credit (Individual, Estate, or Trust)

Tax Guide for U.S. Citizens and Resident Aliens Abroad

U.S. Citizens and Resident Aliens Abroad

You can choose each tax year to take the amount of a qualified tax paid or accrued during the year as a foreign tax credit or as an itemized deduction.
The foreign tax credit is intended to relieve U.S. taxpayers of the double tax burden when their foreign source income is taxed by both the United States and the foreign country from which the income is derived.
Only income taxes paid or accrued to a foreign country or a U.S. possession qualify for the foreign tax credit.
You can choose to take the amount of any qualified foreign taxes paid or accrued during the year as a foreign tax credit or as an itemized deduction.
To choose the foreign tax credit you must generally complete Form 1116 (PDF), Foreign Tax Credit, and attach it to your Form 1040 (PDF).
You may claim credit without attaching Form 1116 if all of your foreign source income is interest or dividends reported to you on qualified payee statements, the total amount of qualifying foreign taxes you paid or accrued is not more than $300 ($600 in the case of a joint return) and is also paid to countries recognized by the United States.
To choose the deduction, you must itemize deductions on Schedule A (Form 1040) (PDF).There are numerous items that can be claimed only as a deduction.
You may not take either a credit or a deduction for taxes paid or accrued on income you exclude under the foreign earned income exclusion or the foreign housing exclusion. There is no double taxation in this situation because the income is not subject to U.S. tax.

Additional Information

Publication 514, Foreign Tax Credit for Individuals Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad Form 1116 (PDF), Foreign Tax Credit Tax Topic 856, Foreign Tax Credit

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Frequently Asked Tax Questions

Aliens and U.S. Citizens Living Abroad - U.S. Citizens Overseas

I am a U.S. citizen working for a U.S. firm in a foreign country. Is any part of my wages or expenses tax deductible?

I am a U.S. citizen living and working overseas. Can I have a tax credit on my U.S. taxes for the taxes I pay to the foreign country?