Yes, a Federal employee working overseas is still considered to be working and living in the United States.
May I ask if the spouse of a federal employee working overseas is also considered the same? What if ithe spouse is self employed with an LLC registered in the US, but operating while here overseas?
The two reasons I ask is I’m confused what to answer for QBI and since the equipment I use in my business is “used outside the United States” I’ve read that I can’t take Section 179 or Bonus Depreciation and must use the ADS method for depreciation (which seems insane to spread over like 20 years for machines that average $300 and computer/tablet at $1500 each) Do you know if I’d also be considered operating in the US as self employed even though we are here under SOFA status and have an APO, AP military address as our legal address?
If your LLC is registered in the US, and your clients are in the US, your equipment is considered to be 'used in the United States'.
However, if you are conducting business in a foreign country with foreign clients, you are not conducting business in the US and would not be eligible for the QBI deduction.
Here's more detailed info on the QBI Deduction.
As the spouse of an military member under SOFA status in a foreign country, you are also considered to be under SOFA status.
Depending on the country you are in, that country may also want to tax your income. You could check with the base personnel to verify. If that applies, you may be eligible for the Foreign Earned Income Inclusion.
Hi MarilynG1!
Thank you for your response… but regarding:
However, if you are conducting business in a foreign country with foreign clients, you are not conducting business in the US and would not be eligible for the QBI deduction….
In my situation although I’m running here in Japan, my clients are not foreign. I sell to other military/civilian employees stationed here or retirees with Military ID’s and access to the bases. I do not have a storefront or anything with a Japanese address and my EIN is registered with my military APO address.
Does that change anything?
Also, we are no longer active duty, but Civilian employees are under the same SOFA status agreement as active duty, if that matters.
If you are doing all of your business on US territory with US citizens then you have no tax filing due for the foreign country that you are in and all of your tax filings are US tax filings. It's really the same as doing business on a US base here in the states. So you qualify for QBI but no foreign earned income or foreign tax credit.