Foreign Allowance

[casiegel]

Hi, I’m just starting a Trainee program with an European Union agency. The stipend they give me is considered an ‘allowance’ in the European country I live in and therefore isn’t taxable. Do I still have to report it on my US taxes?

[tagteam]

Probably (you are taxed on your worldwide income, generally). I will page @pk, who is very good at this.

[pk]

@casiegel , as I understand from Euro Commission site , the stipend  is really to defray the cost of living  in the country.  Thus  for a US citizen/ Green Card holder, this income would be looked upon as a stipend  paid to you and is income that is taxable.   However, because you are having a foreign tax home  ( if you are staying abroad for more than 330 days total in a continuous 12 month test period, then this income would be eligible for  foreign earned income exclusion.   From Euro-Union site it appears the session starts in October and so you will have to be abroad  till atleast  Oct of 2023 to be able to file a 12 month test period to establish foreign tax home.

Does this help ?   If you need more , then please provide your immigration status  ( US citizen/ Green Card  or ? ), how long is your trainee period expected to be , which country  ( Belgium or ? ) etc.

pk

[casiegel]

Ok, thank you! I have already been abroad for a few years, so I've been taking the FEI exclusion on all my self-employed income since I've been here. This is my first time having an actual contract and I wasn't sure if it should be included on my taxes or excluded all together given the way my country of residence views it. But I will put it and take the exclusion for it. Thanks!!

[casiegel]

Hi @pk, 

I hope you've been doing well. Just one more question on this foreign allowance topic. Of course, the EU will not provide a tax form that is used in the US, and in the system the trainees are considered students which is why the allowance is not taxable by my country of residence (Italy). So, should I report this as income without a tax form, or do I find some way to put it under student grants (and of course either way include it in the FEI)?

[RobertB4444]

Either way would work since you're reporting it just to exclude it.  I would go with the income without a tax form.  Easiest.

@casiegel