How to calculate foreign earned income

[tracywormwood]

Do I add up my foreign income before or after foreign taxes?

[pk]

@tracywormwood 

(a) which country ?

(b) when did you enter that country and are you still there ?  If not when did you leave that country?

(c) Were you employed by a local entity / a subsidiary of an US entity or what ?

 You need to report Gross  foreign income ( did you get a statement of earnings from your employer ?).   Any  income taxes  on any unexcluded  income ( FEIE remnant ) is eligible for foreign tax credit.

Please answer my questions -- there may be  US-That Country  tax treaty implications.

I will circle back once I hear from you 

[tracywormwood]

Thanks. I live in Sweden now, I still live here. I received my first pay in August of 2024. I have payslips from each month. I'm employed by a swedish company. They have a US office, but I am employed by the swedish entity (the company started in Sweden). 

[pk]

@tracywormwood , 

(a) Your foreign source income ( for US purposes ) is the gross  amount  ( equivalent to what would appear on Box 1  a W-2 ) -- this is before any tax/ withholdings .  I am assuming here that your employer provides you with  your gross pay and also the taxes withheld on that income.

(b) Note that for you to be able to  exclude   your Foreign Earned Income ( FEIE ), you would need a full 12 month test period of residence in Sweden -- for  Physical Presence you need to be  out of US  for 330 days  in any 12 month test period. -- form 2555.

So tell me when did you arrive in Sweden ?   What I am looking for is the first full  day  -- that is when you have established a foreign tax home..  Thus for example  your first full day was  July 2nd ( having arrived on the morning of July1st. ) 2024, then your earliest test period is  07/02/2024 to 07/01/2025.  So you would file your return after having met the  Physical Presence Test and be able to exclude  all foreign earnings  for 2024 post establishment of the  tax home.

Is there more I can do for you ?

[tracywormwood]

I arrived in Sweden on July 28th. However, I lived in Chile from January 4th, 2024 to July 3rd, 2024. I think I can sum 330 days living outside the US with this. I did not work while I was living in Chile. I did not work in 2024 at all until I started my job in Sweden.

[pk]

@tracywormwood , yes you are correct ---- your test period  can be  Jan5th  2024 ( the first full day in a country -- Tax  home Chile and then Sweden ) through  Jan 5th 2025. .

So is there more I can do for you ?