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 | Americans living outside the United States have a special deadline of June 15th to file their tax returns or to request an extension until October 15th. | |
Foreign Earned Income Exclusion
Americans who reside and work outside the US may be eligible to claim a special deduction called the foreign earned income exclusion. Up to $91,500 of wages or self-employed income can be exempted from the federal income tax for 2010. This exclusion is obtained by filing Form 2555 with your Form 1040.
| Foreign Tax Credit
Americans living abroad who have income in excess of the foreign earned income exclusion might want to see if the foreign tax credit results in lower federal income taxes. This credit offsets US federal income taxes based on taxes paid to a foreign country or countries on the same income that's taxed in the US. The foreign tax credit works particularly well for investment income and for wage and self-employment income in excess of the foreign exclusion.
| IRAs for Americans Working Abroad
Americans working in foreign countries may able to set money aside in a IRA. However there are some technical rules that call for close scrutiny to ensure that your savings achieve the maximum tax savings. In particular, the foreign earned income exclusion coordinates with the rules for IRA eligibility, and this creates a very narrow range of options for Americans living and working abroad.
| Disclose any Foreign Bank Accounts
Americans who live, work or conduct business abroad most likely have opened bank accounts in foreign countries. The US Treasury has a separate report, called a Foreign Bank Account Report, whose sole purpose is to disclose the existence of foreign-based bank and financial accounts. This report has its own deadline (June 30th) and is filed separately from the tax return.
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