I lived in Hong Kong for 3 years & moved back to the US in July 2019. The only income I earned in 2019 was in HK (under 100k). Why is it not all excluded under the FEIE?

[SV6]

More info: I am a U.S. citizen and I am now in graduate school. I met the physical presence test.

[SusanY1 · Accepted solution]

While your days absent from the U.S. do not have to be within the same calendar year to qualify you for the Foreign Earned Income Exclusion, the calendar year days do count when it comes to determining the amount of the exclusion itself. 

To meet the physical presence test, for example, you have to be absent from the U.S. any 330 of 365 days.  However, when calculating the amount of income that is excluded, it is the number of days you are absent in 2019 that are used. 

The amount of income that you are allowed to exclude each year is up to $105,900 for 2019.  The actual dollar amount is calculated based on the number of days in the tax year that you spent outside of the U.S. (see section VII of Form 2555 HERE for the calculation).  

If you paid Hong Kong taxes on the same income, it may work better for you to take the foreign tax credit instead of using the Foreign Earned Income Exclusion for 2019 since you returned to the U.S. prior to the end of the year.