Foreign Income Exclusion 2019

[htsteinke]

I worked overseas and qualify for the foreign income exclusion by physical presence.  Question is...if the 2019 IRS foreign income exclusion is $105900.00, and I made more than that...why is my return showing that only ~$85000.00 qualifies for the exclusion?  Thank you.

[AmeliesUncle]

The maximum Foreign Earned Income Exclusion for wages is $105,900, and is based on if you outside of the US for the entire year.

If you were in the US for part of the year, that $105,900 is prorated based on the time you were outside of the US.

Does that solve your question?  If not, carefully look at Form 2555 (especially lines 37-42) to figure out what is going on.

[Htsteinke1]

I have the dates set for 365 days, but still is not the full 105,900.  I will look at the form but I feel this is a software error.  Thank you.

[LeonardS]

If you qualify for the Foreign Earned Income Exclusion FEIE by the physical presence test generally your qualifying time period covers two tax years.  Therefore your FEIE is prorated for the first year by the number of days in that year you qualified for the FEIE. 

Based on your question you were not working abroad for the full year 2019.  Your exclusion for 2019 is computed as a percentage of your (qualifying time percentage) x (maximum FEIE).  As an example, if your qualifying time for 2019 was 20% then you would receive 20% of the maximum FEIE. 

IRS instructions for Form 2555 "... Line 16. The 12-month period on which the physical presence test is based must include 365 days, part of which must be in 2019. The dates may begin or end in a calendar year other than 2019...."

This link is to the IRS Instructions for Form 2555.