How to properly enter Foreign Earned Income and Foreign Salary Taxes Paid?

[IreneS · Accepted solution]

If you meet the requirements, you can exclude up to $100,800 in foreign earnings from your taxable income. You can also take a credit (or deduction) for foreign taxes paid.  However, you won't be able to take a credit or deduction for taxes paid (or accrued) on foreign earned income/housing that you excluded (because excluded income/housing isn't being taxed.

To enter foreign earned income in TurboTax, please follow these steps:

1. Click on Federal Taxes > Wages & Income  [If you're in TT Home & Biz:  Personal > Personal Income > I'll choose what I work on]
2. In the Less Common Income section, click on the Start/Update box next to Foreign Earned Income and Exclusion.  (See Screenshot #1, below.)
3. On the screen Did You Make Any Money Outside the United States? mark Yes and click Continue.  (Screenshot #2)
4. On the screen What Form(s) Was Foreign Income Reported On? mark the selection that applies and click Continue. (Screenshot #3)
5. Continue through the screens, entering the requested information.

For more information on the Foreign Earned Income Exclusion, see Foreign Earned Exclusion on the IRS website.

To enter foreign taxes paid, please follow these steps:

1. Click on Federal Taxes > Deductions & Credits [In TT Home & Biz:  Personal > Deductions & Credits > I'll choose what I work on].
2. Scroll down to the Estimates and Other Taxes Paid section.
3. Click on the box next to Foreign Taxes.  (Screenshot #4)
4. On the Foreign Tax Credit screen, click on the Yes box.
5. Enter the information requested on the screens. 

[janareye]

Just wondering, I live in the UK and am self employed.  I have entered my foreign earned income and it tells me all of the income is eligible for exclusion. Then on another screen, it says I still have to enter the income information on the business section of TurboTax and/or K1? I am very confused by this, because when I enter it there it tells me I then have to pay tax on my foreign earned income. How do I go about filing for self employed foreign earned income? thanks

[LinaJ2020]

First of all, the foreign earned income exclusion applies to your self-employment income and reduces the income tax.  However, it does not exclude the self-employment SE taxes.  Please continue to read:

In order to include your self-employment income and SE taxes in your foreign income exclusion calculations, you would first have to enter your self-employment income under Schedule C.   

• After sign into your account, select Take me to my account
• To your right upper corner, in the search box, type in schedule c
• Follow prompts

To allow the program to exclude the foreign self-employed income, you would then enter the foreign income amount under Foreign Income by following these steps:

• At the right upper corner, in the search box, type in foreign income and Enter 
• Select Jump to foreign income 
• Next screen, Did You Make Any Money Outside the United States? answer Yes 
• On the screen, What Form(s) Was Foreign Income Reported On ? select A Form 1099-MISC or other self-employment income
• Follow prompts 

The program will then exclude your self-employment income but will calculate the SE tax. 

@janareye

[americano]

Hi, thanks for the information you've already provided. I'm wondering if you can answer a question building on this? I do not owe SE tax to the US, because I already have to pay it in Germany, where I pass the bona fide presence test. There is a totalization agreement between the US and Germany regarding SE taxes. Where do I enter this information on Turbotax? Thanks!

[ray_t]

Hello @LinaJ2020, 

I'm filing as a self-employed living abroad (fulfilling the Physical Presence test). All my income from performing is foreign. My question is about online sales such as CDs (digital downloads, streaming, etc...) and royalties. Can I also exclude these as they don't necessarily relate to any specific location?
Also, I left the US in April 2019, am I supposed to file for state as well (New York specifically)?

Thank you!

[jwbakken]

Can I use TT Deluxe edition to enter foreign income and foreign salary taxes, or do i need a different TT version?

[DavidD66]

@jwbakken You can use TurboTax Deluxe to report your foreign income and foreign tax paid.    For information about the foreign tax credit as well as links to other useful information related to foreign income go to:  Claim the Foreign Tax Credit 

[MrLargent]

Hi, I work in Vietnam and my company pays my taxes on my behalf- I just receive net income. Do I need to enter them as if I 'paid' them, or not?

Thanks,

D

[MrLargent]

Hi, I work in Vietnam and my company pays my taxes on my behalf- I just receive net income. Do I need to enter them as if I 'paid' them, or not?

[MaryK4]

No, if the income reported does not include the taxes paid for you (gross income), you cannot take the take the foreign tax credit.

@MrLargent

[ihatetaxes2018]

Where are the screenshots?

[drmm30]

Hi ! I work in UK . ALl my salary is from UK and tax is deducted automatically before pay. How do I file my tax please

[AmyC]

US citizens pay tax on worldwide income. If you meet the requirements, you can exclude up to $108,700 (2021 amount) in foreign earnings from your taxable income. You can also take a credit (or deduction) for foreign taxes paid on U.S. taxed income.

To enter foreign earned income in TurboTax, please follow these steps:

1. Click on Federal Taxes >  Income & Expenses
2. In the Less Common Income section, click START on  Foreign Earned Income and Exclusion.  
3. On the screen Did You Make Any Money Outside the United States? Select Yes and click Continue.  
4. On the screen What Form(s) Was Foreign Income Reported On?  Select Statement from my employer and click Continue
5. Continue through the screens, entering the requested information in U.S. dollars.

For more information on the Foreign Earned Income Exclusion, see Foreign Earned Exclusion on the IRS website.

If any of the income is taxable then you will want to enter foreign taxes paid, please follow these steps:

1. Click on Federal Taxes > Deductions & Credits [
2. Scroll down to the Estimates and Other Taxes Paid section.
3. Click START on the box next to Foreign Taxes.  
4. Continue 
5. Did you pay taxes on income outside the U.S.? Click Yes, I did..
6. Continue
7. Continue
8. Foreign Taxes, click Continue
9. Deduction or Credit? Most people choose the credit since so few itemize deductions. You can try it both ways and determine what is best for you. Select an option.
10. Continue to enter the information requested on the screens. 

[flyhigh72]

Hi, I have trouble of Foreign Earned Income on 2021 Turbo Tax.  I finished all tax entries first except "Foreign Earned Income" and I have some refund from Federal as indicated by TurboTax, however, when I entered the amount of earned income the "Federal Refund" dropped $2500.  Although the Foreign Earned Income Exclusion says I'm qualified for the exclusion but the refund amount never goes back to amount before.  I tried many times using different options but it always reduces the refund as soon as I entered the Foreign Earned Income.  Is this a bug in TT or something I did wrong?   Thanks in advance for any help!