A U.S. citizen or resident alien is generally subject to U.S. tax on total worldwide income. However, if you are a United States citizen or a resident alien who lives and works abroad, you may qualify to exclude all or part of your foreign earned income. For specific information, refer to Tax Topic 853, Foreign Earned Income Exclusion - General.

If you would like more information on who qualifies for the exclusion, refer to Tax Topic 854, Foreign Earned Income Exclusion - who qualifies. For more information on what type of income qualifies for the exclusion, refer to Tax Topic 855, Foreign Earned Income Exclusion - what qualifies. You may also wish to refer to Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad, for a detailed discussion.

If the information you need relating to this topic is not addressed in Publication 54, you may call the IRS International Tax Law hotline. The number is (215) 516-2000. This is not a toll-free number.

References:

• Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad
• Tax Topic 853, Foreign Earned Income Exclusion - General
• Tax Topic 854, Foreign Earned Income Exclusion - who qualifies
• Tax Topic 855, Foreign Earned Income Exclusion - what qualifies

The IRS has a full-time permanent staff in 6 U.S. Embassies. These offices have tax forms and publications, can help you with account problems, and answer your questions about notices and bills. For more information about these offices, please refer to www.irs.gov under "Contact My Local Office."

In addition, most U.S. Embassies stock the more commonly used tax forms and publications, and sponsor speaking tours by IRS employees during filing season.

As a U.S. citizen, you cannot file Form 1040NR (PDF), U.S. Nonresident Alien Income Tax Return. If you make an election to file a joint return with your nonresident alien spouse (your spouse must, in turn, elect to be taxed as U.S. resident), file Form 1040 (PDF), U.S. Individual Income Tax Return (or Form 1040A (PDF) or Form 1040EZ (PDF) if otherwise applicable), and report both incomes from worldwide sources.

You will need to get an ITIN for your spouse. To apply for an ITIN, file Form W-7 (PDF), Application for IRS Individual Taxpayer Identification Number.

References:

• Form 1040NR (PDF), U.S. Nonresident Alien Income Tax Return
• Form 1040 (PDF), U.S. Individual Income Tax Return
• Form W-7 (PDF), Application for IRS Individual Taxpayer Identification Number
• Tax Topic 857, Individual Taxpayer Identification Number - Form W-7

As a U.S. citizen, your worldwide income generally is subject to U.S. income tax, regardless of where you are living. However, you may qualify for the foreign earned income exclusion, foreign housing exclusion or foreign housing deduction, or the foreign tax credit. These tax benefits can reduce or eliminate the U.S. tax you would otherwise have to pay on your foreign income.

References:

• Publication 54, Tax guide for U.S. Citizens and Resident Aliens Abroad
• Publication 514 , Foreign Tax Credit for Individuals
• Form 2555 (PDF), Foreign Earned Income
• Form 2555EZ (PDF) , Foreign Earned Income Exclusion
• Form 1116 (PDF), Foreign Tax Credit

U.S. citizens are taxed on their worldwide income, no matter where they work. Some taxpayers may qualify for the foreign earned income exclusion, foreign housing exclusion, or foreign housing deduction, if their tax home is in a foreign country and they were either a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax year, or were physically present in a foreign country or countries for at least 330 full days during any period of 12 consecutive months. If the taxpayer is temporarily away from his or her tax home in the United States on business (less than a year), the taxpayer may qualify to deduct away from home expenses (for travel, meals, and lodging ) but would not qualify for the foreign earned income exclusion.

References:

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

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.

Generally, 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. You may claim credit without attaching Form 1116 if all of your foreign source income is passive income (such as interest and dividends) reported to you on a payee statement and 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 reported to you on a payee statement. To choose the deduction, you must itemize deductions on Schedule A, Form 1040.

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.

References:

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