Working online for a US company, but from overseas, can I use foreign earned income?
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Working online for a US company, but from overseas, can I use foreign earned income?

I'm an American and full time employee for a company in the US. However I live, hold residency permits and work online from a foreign country. I've been a resident of that country for the entire year. Do I qualify for foreign earned income credit even though the company is based in the US?
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Working online for a US company, but from overseas, can I use foreign earned income?

Firstly- Yes, you qualify as having foreign earned income. As stated in the IRS link below, “The source of your earned income is the place where you perform the services for which you received the income.”

https://www.irs.gov/individuals/international-taxpayers/foreign-earned-income-exclusion-what-is-fore...

You must meet either the substantial presence test or the bona residence test to exclude your earned income via Form 2555- Foreign Earned Income. This is not actually a credit, but instead some or all of your foreign-earned income is excluded from tax. The location of the employer is not a consideration unless you work for the US government.

And also, as far as a tax credit - No, you cannot receive the Earned Income Tax Credit (EITC)if you file Form 2555 to exclude all or some of your foreign earned income. While you are not required to exclude this income on Form 2555, two major points keep most taxpayers living abroad from qualifying for the Earned Income Credit altogether:

1.       If your credit would be based on having a qualifying child, qualifying for the EITC may be very difficult. Your child must have lived with you or your spouse “in the United States for more than half the year and have a social security number that is valid for employment in the United States.”

2.       Without a qualifying child, YOU need to “live in the United States for more than half the year”

In your case, having lived abroad “all year”, you are not eligible for the Earned Income Tax Credit. But you are likely eligible to exclude some or all of your income via the Foreign Earned Income Exclusion.

 

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