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Foreign Earned Income Exclusion
The United States taxes citizens and residents on their worldwide income. Citizens and residents living and working outside the U.S. may be entitled to a foreign earned income exclusion that reduces taxable income. For 2021, the maximum exclusion is $108,700 per taxpayer (future years indexed for inflation). Taxpayers filing a joint return are entitled to up to two exclusions if both have earned income. In addition, the taxpayer may exclude housing expenses in excess of 16% of this maximum ($47.65 per day in 2021) but with limits. The exclusion is available only for wages or self-employment income earned for services performed outside the U.S. The exclusion is claimed on IRForm 2555 Qualification Only individuals are eligible for the exclusion. To qualify for the exclusion, the taxpayer's tax home must be outside the U.S. In addition, the taxpayer must meet either of two tests: * Bona fide resident test: the taxpayer was a bona fide resident of a foreign country for a period t ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Bona Fide Resident Test
The bona fide residence test, like the physical presence test, comprises one way that an individual can qualify for the foreign earned income exclusion. In order to qualify for the bona fide residence test, an individual needs to reside in a foreign country for an uninterrupted period that includes an entire tax year. In addition, the bona fide residence test takes into account factors such as the individual's intention, the purpose of the trip, and the length and nature of the stay. There are special deductions and exclusions that accompany this only if the individual is a U.S. citizen or U.S. resident alien and has a tax treaty. The bona fide residence is not always the same as the domicile. The domicile is defined as one's permanent home. Example Mike moves to South Africa for work and expects to be there for an indefinite or extended period. Mike has a residence in South Africa for an entire year; his home is still in New York City, and he intends to return here after his stay ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Physical Presence Test
In international taxation, a physical presence test is a rule used to determine tax residence of a natural or legal person. It may rely on having a place of business in the jurisdiction (for legal persons), or remaining in or out of the jurisdiction for a certain number of days each year (for natural persons). Australia The "physical presence in Australia test" is one of the three tests under Australian law through which a charitable institution may be entitled to the income tax-exempt charity endorsement; the others are the "deductible gift recipient test" and the "prescribed by law" test. The two elements of the test are whether the institution has a physical presence in Australia (wholly or through a division, branch, or subdivision) and whether or not the expenditures of an institution are incurred principally in Australia. An institution may still qualify even if its expenditure is not incurred principally in Australia, provided that the amounts expended elsewhere are less tha ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Tax Treaty
A tax treaty, also called double tax agreement (DTA) or double tax avoidance agreement (DTAA), is an agreement between two countries to avoid or mitigate double taxation. Such treaties may cover a range of taxes including income taxes, inheritance taxes, value added taxes, or other taxes. Besides bilateral treaties, multilateral treaties are also in place. For example, European Union (EU) countries are parties to a multilateral agreement with respect to value added taxes under auspices of the EU, while a joint treaty on mutual administrative assistance of the Council of Europe and the Organisation for Economic Co-operation and Development (OECD) is open to all countries. Tax treaties tend to reduce taxes of one treaty country for residents of the other treaty country to reduce double taxation of the same income. The provisions and goals vary significantly, with very few tax treaties being alike. Most treaties: * define which taxes are covered and who is a resident and eligible for ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
United States Federal Income Tax
Income taxes in the United States are imposed by the federal government, and most states. The income taxes are determined by applying a tax rate, which may increase as income increases, to taxable income, which is the total income less allowable deductions. Income is broadly defined. Individuals and corporations are directly taxable, and estates and trusts may be taxable on undistributed income. Partnerships are not taxed (with some exceptions in the case of Federal income taxation), but their partners are taxed on their shares of partnership income. Residents and citizens are taxed on worldwide income, while nonresidents are taxed only on income within the jurisdiction. Several types of credits reduce tax, and some types of credits may exceed tax before credits. An alternative tax applies at the federal and some state levels. In the United States, the term "payroll tax" usually refers to FICA taxes that are paid to fund Social Security and Medicare, while "income tax" ref ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
