Foreign Earned Income Exclusion Question

[KVE 29]

I was in the USA for Oct 2013 to Jan 2014 as a tourist (ESTA) for 80ish days last year, I wasn't married. I applied for my K-1 in March and I was in the USA from July 2014 onwards.

So does this mean I wouldn't qualify for foreign earned income exclusion for income I made prior to my settlement in the USA from July 2014 onwards? Or does being here as a tourist not count as time in the USA for tax purposes?

[Nich-Nick 3,354]

You qualify to file joint with your US spouse for 2014 by making a written election to do so.

If you file joint, then worldwide income of both of you is reported.

To be eligible to claim a foreign income exclusion for that income, you had to be a bonafide resident of that foreign country (the UK) or had enough physical presence in that foreign country (the UK).

Do you hold UK citizenship? If yes, you are a bonafide resident and qualify.

Did you live in the UK since birth? Then you have years and years beyond the minimum qualifying time in the foreign country.

You likely qualify on both bonafide resident and physical presence, but only one of those is needed.

[KVE 29]

Is that the case even though in the 365 period before I came to the USA, I was actually only outside for 280ish because of the trip to the USA on a tourist visa.

[sweetswinks 400]

Is that the case even though in the 365 period before I came to the USA, I was actually only outside for 280ish because of the trip to the USA on a tourist visa.

Out of curiosity where does it say the presence must be close to/immediately before the tax year you are filing?

[Nich-Nick 3,354]

Is that the case even though in the 365 period before I came to the USA, I was actually only outside for 280ish because of the trip to the USA on a tourist visa.

Counting days doesn't really matter if you were a bonafide resident of the UK. Do you have a UK passport? Then you were a resident and authorized to live and work in the UK.

You have to understand this foreign income exclusion tax law is written more for Americans who work abroad. They have to qualify as resident in that foreign country with a visa or some kind of permission from the UK government for example. Or they had to have been there a LOT of days to qualify on presence. All that day counting is to make sure the American qualifies. If you were a citizen of that foreign country, then you qualify as a bonafide resident.

It is either/or. You don't have to meet both tests. Go with being a full fledged citizen (resident) of the UK as why you qualify to exclude your UK income.

Edited February 3, 2015 by Nich-Nick

[KVE 29]

Counting days doesn't really matter if you were a bonafide resident of the UK. Do you have a UK passport? Then you were a resident and authorized to live and work in the UK.

You have to understand this foreign income exclusion tax law is written more for Americans who work abroad. They have to qualify as resident in that foreign country with a visa or some kind of permission from the UK government for example. Or they had to have been there a LOT of days to qualify on presence. All that day counting is to make sure the American qualifies. If you were a citizen of that foreign country, then you qualify as a bonafide resident.

It is either/or. You don't have to meet both tests. Go with being a full fledged citizen (resident) of the UK as why you qualify to exclude your UK income.

That's great. I just did it. Although for some reason the tax refund is slightly lower than when I didn't have any foreign income entered on TurboTax. Oh well...

Do you know if I can get moving expenses paid for as I shut down my UK business (before move) and started my USA business (after move)? https://turbotax.intuit.com/tax-tools/tax-tips/General-Tax-Tips/IRS-Moving-Expense-Deductions/INF14389.html

[Nich-Nick 3,354]

That's great. I just did it. Although for some reason the tax refund is slightly lower than when I didn't have any foreign income entered on TurboTax. Oh well...

Do you know if I can get moving expenses paid for as I shut down my UK business (before move) and started my USA business (after move)? https://turbotax.intuit.com/tax-tools/tax-tips/General-Tax-Tips/IRS-Moving-Expense-Deductions/INF14389.html

The difference is because the income isn't just deleted. With a foreign income exclusion the traditional tax tables aren't used. There is a worksheet if manual or magic in the background in TurboTax.

Works like this:

1. Figure tax on the total of all the income.

2. Figure the tax on just the foreign.

3. The difference is the actual tax.

(#1 minus #2 equals TAX)

So it's like your tax is based on all of it, then they take off the part the foreign would have generated by itself. It isn't as great as if they simply erased the income, but often better than Married Separately.