May 08 2008
alternative minimum tax exclusion
post by writer4
alternative minimum tax exclusion
Tax Relief - Foreign Earned Income
A U.S. citizen is taxed on their global income in the USA. The same applies to resident aliens of the U.S. Global income means income earned in any part of the world. It can be income received from a U.S. or foreign company. However, there is tax relief available in respect to income earned abroad in some situations by the exclusion of foreign income. An exclusion applies to what is called foreign earned income.
The main condition for the exclusion is residence in a foreign country. You need to be a continuous legal resident of the foreign country for a period of one tax year. In the case of a U.S. resident alien, the bonafide residence for one tax year needs to be in a country with which the U.S. has an income tax treaty. Alternatively, your physical presence in the foreign country should be for at least 330 days during a period of one continuous year. In other words, for tax relief, your tax home needs to be in the foreign country.
Certain types of foreign earned income are not eligible for exclusion as they are not considered as being in this category. Examples of such income are:
- Pension payments and benefits from social security
- Payments made to its employees by the U.S. government
- Payments received in the succeeding tax year in respect to services performed during the preceding tax year
Those meeting the conditions of residence or physical presence are also entitled to tax relief in respect to foreign housing. There is no foreign tax credit available in respect to excluded income. This is so that such income does not suffer double tax because of its exclusion.
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alternative minimum tax exclusion
alternative minimum tax example
alternative minimum tax example