Department of the Treasury

Internal Revenue Service

Future Developments
For the latest information about developments related to
Publication 54 Pub. 54, such as legislation enacted after it was
Cat. No. 14999E published, go to IRS.gov/Pub54.

Tax Guide for What's New

U.S. Citizens Termination of 1979 Tax Convention with Hungary.
On July 15, 2022, the U.S. Department of the Treasury

and Resident
(Treasury) announced that Hungary was notified on July
8, 2022, that the United States would terminate the Con-
vention between the Government of the Hungarian Peo-

Aliens Abroad
ple’s Republic for the Avoidance of Double Taxation and
the Prevention of Fiscal Evasion with Respect to Taxes on
Income, in force since 1979. In accordance with the trea-
ty’s provisions on termination, termination is effective on
For use in preparing January 8, 2023. However, with respect to taxes withheld
at source, the treaty ceases to have effect on January 1,
2023 Returns 2024. In respect of other taxes, the treaty ceases to have
effect with respect to taxable periods beginning on or after
January 1, 2024.
Standard deduction amount increased. For 2023, the
standard deduction amount has been increased for all fil-
ers. The amounts are:
• Single or Married filing separately—$13,850;
• Married filing jointly or Qualifying surviving
spouse—$27,700; and
• Head of household—$20,800.
Due to the increase in the standard deduction,
you may be required to file a new Form W-4. For
more information, go to IRS.gov/Payments/Tax-
Withholding.
Exclusion amount. The maximum foreign earned in-
come exclusion is adjusted annually for inflation. For
2023, the maximum exclusion has increased to $120,000.
See Limit on Excludable Amount under Foreign Earned In-
come Exclusion in chapter 4.
Housing expenses—maximum amount. Generally, the
maximum amount of housing, housing expenses is limited
to $36,000 for 2023. For such computation, you need to
determine your base housing amount (line 32 of Form
2555) which is $56.60 per day ($19,200 per year) for
2023, multiplied by the number of days in your qualifying
period that fall within your tax year. For more details, see
Housing Amount under Foreign Housing Exclusion and
Deduction in chapter 4.
Housing expenses—maximum amount continued.
The amount of qualified housing expenses eligible for the
housing exclusion and housing deduction may be higher
for your foreign geographic location. See Limit on housing
expenses under Foreign Housing Exclusion and Deduc-
Get forms and other information faster and easier at: tion in chapter 4.
• IRS.gov (English) • IRS.gov/Korean (한국어) Self-employment tax rate. For 2023, the maximum
• IRS.gov/Spanish (Español) • IRS.gov/Russian (Pусский) amount of net earnings from self-employment that is
• IRS.gov/Chinese (中文) • IRS.gov/Vietnamese (Tiếng Việt)
subject to the social security part of the self-employment

Feb 26, 2024

tax has increased to $160,200. All net earnings are sub-
ject to the Medicare part of the tax. For more information,
see chapter 3.
Introduction
IRA limitations. You may be able to take an IRA deduc- This publication discusses special tax rules for U.S. citi-
tion if you were covered by a retirement plan and your zens and resident aliens who work abroad or who have in-
2023 modified adjusted gross income (MAGI) is less than come earned in foreign countries.
$83,000 ($136,000 if married filing jointly or a qualifying If you are a U.S. citizen or resident alien, your world-
surviving spouse). If your spouse was covered by a retire- wide income is generally subject to U.S. income tax, re-
ment plan, but you were not, you may be able to take an gardless of where you are living. Also, you are subject to
IRA deduction if your MAGI is less than $228,000. See the the same income tax filing requirements that apply to U.S.
Instructions for Form 1040 for details and exceptions. citizens or resident aliens living in the United States. Ex-
patriation tax provisions apply to U.S. citizens who have
renounced their citizenship and long-term residents who
have ended their residency. These provisions are dis-
Reminders cussed in chapter 4 of Pub. 519.
Denial or revocation of U.S. passport. The IRS is re- Resident alien. A resident alien is an individual who is
quired to notify the State Department of taxpayers certified not a citizen or national of the United States and who
as owing a seriously delinquent tax debt. The State De- meets either the green card test or the substantial pres-
partment is generally prohibited from issuing or renewing ence test for the calendar year.
a passport to a taxpayer with seriously delinquent tax
debt. 1. Green card test. You are a U.S. resident if you were
If you currently have a valid passport, the State Depart- a lawful permanent resident of the United States at
ment may revoke your passport or limit your ability to any time during the calendar year. This is known as
travel. Additional information on passport certification is the green card test because resident aliens hold im-
available at IRS.gov/Passports. migrant visas (also known as green cards).
Individual taxpayer identification number (ITIN) re- 2. Substantial presence test. You are considered a
newal. An ITIN for a nonresident alien spouse or depend- U.S. resident if you meet the substantial presence test
ent used on a prior-year income tax return may require re- for the calendar year. To meet this test, you must be
newal. For more information, go to IRS.gov/ITIN. physically present in the United States on at least:
Figuring tax on income not excluded. If you claim the a. 31 days during the current calendar year; and
foreign earned income exclusion, the housing exclusion, b. A total of 183 days during the current year and the
or both, you must figure the tax on your nonexcluded in- 2 preceding years, counting all the days of physi-
come using the tax rates that would have applied had you cal presence in the current year, but only 1/3 the
not claimed the exclusions. See the Instructions for Form number of days of presence in the first preceding
1040 and complete the Foreign Earned Income Tax Work- year, and only 1/6 the number of days in the sec-
sheet to figure the amount of tax to enter on Form 1040 or ond preceding year.
1040-SR, line 16. If you must attach Form 6251, Alterna-
tive Minimum Tax—Individuals, to your return, use the For- Example. You were physically present in the United
eign Earned Income Tax Worksheet provided in the States for 120 days in each of the years 2021, 2022, and
Instructions for Form 6251. 2023. To determine if you meet the substantial presence
Moving expenses suspended. The deduction for mov- test for 2023, count the full 120 days of presence in 2023,
ing expenses is suspended unless you are a member of 40 days in 2022 (1/3 of 120), and 20 days in 2021 (1/6 of
the U.S. Armed Forces who moves pursuant to a military 120). Because the total for the 3-year period is 180 days,
order and incident to a permanent change of station. you are not considered a resident under the substantial
Tax home for individuals serving in a combat zone. presence test for 2023.
New rules apply for certain individuals serving in a combat Even if you do not meet either of these tests, you may
zone in support of the U.S. Armed Forces. For more infor- be able to choose to be treated as a U.S. resident for part
mation, see Tax Home in chapter 4. of the year under the first-year choice test, discussed in
Pub. 519.
Form 8938. If you had foreign financial assets, you may For more information on resident and nonresident sta-
have to file Form 8938 with your return. See Form 8938 in tus, the tests for residence, and the exceptions to them,
chapter 1. see Pub. 519.
Photographs of missing children. The IRS is a proud
partner with the National Center for Missing & Exploited Filing information. Chapter 1 contains general filing in-
Children® (NCMEC). Photographs of missing children se- formation, such as:
lected by the Center may appear in this publication on pa- • Whether you must file a U.S. tax return,
ges that would otherwise be blank. You can help bring
these children home by looking at the photographs and • When and where to file your return,
calling 1-800-THE-LOST (1-800-843-5678) if you recog- • How to report your income if it is paid in foreign cur-
nize a child. rency,

2 Publication 54 (2023)
 • How to treat a nonresident alien spouse as a U.S. resi- Service, Tax Forms and Publications, 1111 Constitution
dent, and Ave. NW, IR-6526, Washington, DC 20224.
Although we can’t respond individually to each com-
• Whether you must pay estimated tax.
ment received, we do appreciate your feedback and will
Withholding tax. Chapter 2 discusses the withholding consider your comments and suggestions as we revise
of income, social security, and Medicare taxes from the our tax forms, instructions, and publications. Don’t send
pay of U.S. citizens and resident aliens. tax questions, tax returns, or payments to the above ad-
dress.
Self-employment tax. Chapter 3 discusses who must
Getting answers to your tax questions. If you have
pay self-employment tax.
a tax question not answered by this publication or the How
Foreign earned income exclusion and housing exclu- To Get Tax Help section at the end of this publication, go
sion and deduction. Chapter 4 discusses income tax to the IRS Interactive Tax Assistant page at IRS.gov/
benefits that apply if you meet certain requirements while Help/ITA where you can find topics by using the search
living abroad. You may qualify to treat up to $120,000 of feature or viewing the categories listed.
your income as not taxable by the United States. You may Getting tax forms, instructions, and publications.
also be able to either deduct part of your housing expen- Go to IRS.gov/Forms to download current and prior-year
ses from your income or treat a limited amount of income forms, instructions, and publications.
used for housing expenses as not taxable by the United
States. These benefits are called the foreign earned in- Ordering tax forms, instructions, and publications.
come exclusion and the foreign housing deduction and ex- Go to IRS.gov/OrderForms to order current forms, instruc-
clusion. tions, and publications; call 800-829-3676 to order
To qualify for either of the exclusions or the deduction, prior-year forms and instructions. The IRS will process
you must have a tax home in a foreign country and earn your order for forms and publications as soon as possible.
income from personal services performed in a foreign Don’t resubmit requests you’ve already sent us. You can
country. These rules are explained in chapter 4. get forms and publications faster online.
If you are going to exclude or deduct your income as
discussed above, you must file Form 2555.

Deductions and credits. Chapter 5 discusses deduc-

tions and credits you may be able to claim on your return.
These are generally the same as if you were living in the 1.
United States. However, if you choose to exclude foreign
earned income or housing amounts, you can’t deduct or
exclude any item or take a credit for any item that is rela- Filing Information
ted to the amounts you exclude. Among the topics dis-
cussed in chapter 5 are:
Topics
• Contributions to foreign organizations, This chapter discusses:
• Contributions to individual retirement arrangements
(IRAs), and • Whether you have to file a return,
• Foreign taxes. • When to file your return and pay any tax due,

Tax treaty benefits. Chapter 6 discusses some benefits

• How to treat foreign currency,
that are common to most tax treaties and explains how to • How to file electronically,
get help if you think you are not receiving a treaty benefit • Where to file your return,
to which you are entitled. It also explains how to get cop-
ies of tax treaties. • When you can treat your nonresident alien spouse as
a resident, and
How to get tax help. Chapter 7 is an explanation of how
to get information and assistance from the IRS.
• When you may have to make estimated tax payments.

Questions and answers. Frequently asked questions Useful Items

and answers to those questions are presented in the back You may want to see:
of the publication.
Publication
Comments and suggestions. We welcome your com-
ments about this publication and suggestions for future 3 3 Armed Forces' Tax Guide
editions.
501 Dependents, Standard Deduction, and Filing
You can send us comments through IRS.gov/
Information
501

FormComments. Or, you can write to the Internal Revenue

505 Tax Withholding and Estimated Tax
505

Publication 54 (2023) Chapter 1 Filing Information 3

 519 U.S. Tax Guide for Aliens Self-employed individuals. If your net earnings from
self-employment are $400 or more, you must file a return
519

970 Tax Benefits for Education

even if your gross income is below the amount listed for
970

Form (and Instructions) your filing status in the table shown earlier. Net earnings
from self-employment are defined in Pub. 334.
1040-ES Estimated Tax for Individuals
1040-ES

1040-X Amended U.S. Individual Income Tax Return 65 or older. You are considered to be age 65 on the day
before your 65th birthday. For example, if your 65th birth-
1040-X

2350 Application for Extension of Time To File U.S. day is on January 1, 2024, you are considered 65 for
Income Tax Return
2350

2023.
2555 Foreign Earned Income
Residents of U.S. territories. If you are (or were) a
2555

4868 Application for Automatic Extension of Time To bona fide resident of a U.S. territory, you may be required
File U.S. Individual Income Tax Return to file Form 8898. See the instructions for the form, availa-
4868

ble at IRS.gov/Form8898 for more information.

8822 Change of Address
8822

All of these forms, instructions, and publications can be When To File and Pay
downloaded from IRS.gov. See chapter 7 for information
about getting these publications and forms. If you file on a calendar-year basis, the due date for filing
your return is April 15 of the following year. If you file on a
fiscal year basis (a year ending on the last day of any
Filing Requirements month except December), the due date is 3 months and
15 days after the close of your fiscal year. In general, the
If you are a U.S. citizen or resident alien, the rules for filing tax shown on your return should be paid by the due date
income, estate, and gift tax returns and for paying estima- of the return, without regard to any extension of time for fil-
ted tax are generally the same whether you are in the Uni- ing the return.
ted States or abroad. When the due date for doing any act for tax purpo-
Your income, filing status, and age generally determine ses—filing a return, paying taxes, etc.— falls on a Satur-
whether you must file an income tax return. Generally, you day, Sunday, or legal holiday, the due date is delayed until
must file a return for 2023 if your gross income from world- the next business day.
wide sources is at least the amount shown for your filing A tax return delivered by the U.S. mail or a desig-
status in the following table. ! nated delivery service that is postmarked or dated
CAUTION by the delivery service on or before the due date
Filing Status* Amount is considered to have been filed on or before that date. Go
Single . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $13,850 to IRS.gov/PDS for the current list of designated services.
65 or older . . . . . . . . . . . . . . . . . . . . . . . . . . . $15,700
Head of household . . . . . . . . . . . . . . . . . . . . . . . . $20,800
65 or older . . . . . . . . . . . . . . . . . . . . . . . . . . . $22,650 Direct Pay option. You can pay online with a direct trans-
Qualifying surviving spouse . . . . . . . . . . . . . . . . . . . $27,700 fer from your bank account using Direct Pay, the Electronic
65 or older . . . . . . . . . . . . . . . . . . . . . . . . . . . $29,200 Federal Tax Payment System (EFTPS), or by debit or
Married filing jointly . . . . . . . . . . . . . . . . . . . . . . . . $27,700
Not living with spouse at end of year . . . . . . . . . . . . $5
credit card. You can also pay by phone using EFTPS or by
One spouse 65 or older . . . . . . . . . . . . . . . . . . . $29,200 debit or credit card. For more information, go to IRS.gov/
Both spouses 65 or older . . . . . . . . . . . . . . . . . . $30,700 Payments.
Married filing separately . . . . . . . . . . . . . . . . . . . . . $5
* If you are the dependent of another taxpayer, see the Instructions for Form 1040 Foreign wire transfers. If you have a U.S. bank ac-
(and 1040-SR) for more information on whether you must file a return. count, you can use:
• EFTPS, or
Note. If you are married and entitled to file jointly, use the • Federal Tax Collection Service (same-day wire trans-
married filing jointly threshold unless your spouse has filed fer).
a separate return or another taxpayer claims your spouse
as a dependent. If you do not have a U.S. bank account, ask if your finan-
cial institution has a U.S. affiliate that can help you make
Gross income. This includes all income you receive in same-day wire transfers.
the form of money, goods, property, and services that is For more information, visit EFTPS.gov. Also, see the In-
not exempt from tax. ternational Guide for Paying Federal Taxes Electronically,
For purposes of determining whether you must file a re- available at download.EFTPS.gov/
turn, gross income includes any income that you can ex- International_Taxpayer_Fact_Sheet_1010.pdf.
clude as foreign earned income or as a foreign housing
amount.
If you are self-employed, your gross income includes
the amount on Part I, line 7, of Schedule C (Form 1040).

4 Chapter 1 Filing Information Publication 54 (2023)

Extensions a credit or debit card or direct transfer. You can do this by
phone or over the Internet. You don’t file Form 4868.
You can get an extension of time to file your return. In First, complete Form 4868 to use as a worksheet. If you
some circumstances, you can also get an extension of think you may owe tax when you file your return, use Part II
time to file and pay any tax due. of the form to estimate your balance due.
Then, do one of the following.
However, if you pay the tax due after the regular due
date, interest will be charged from the regular due date 1. E-file Form 4868. You can use a tax software pack-
until the date the tax is paid. age with your personal computer or a tax professional
to file Form 4868 electronically. You will need to pro-
This publication discusses four extensions: an auto- vide certain information from your tax return for 2022.
matic 2-month extension, an automatic 6-month exten- If you wish to make a payment by electronic funds
sion, an additional extension for taxpayers out of the coun- withdrawal, see the instructions for Form 4868. If you
try, and an extension of time to meet residency tests. If e-file Form 4868, do not also send a paper Form 4868
you served in a combat zone or qualified hazardous duty unless you also mail a check or money order for your
area, see Pub. 3 for a discussion of extensions of dead- tax payment.
lines.
2. E-file and pay by credit or debit card. You can get
Automatic 2-month extension. You are allowed an au- an extension by paying part or all of your estimate of
tomatic 2-month extension to file your return and pay fed- tax due by using a credit or debit card. You can do this
eral income tax if you are a U.S. citizen or resident alien, by phone or over the Internet. If you do this, you do
and on the regular due date of your return: not file Form 4868. For more information, see the in-
structions for your tax return.
• You are living outside the United States and Puerto
Rico and your main place of business or post of duty When to file. Generally, you must request the
is outside the United States and Puerto Rico, or 6-month extension by the regular due date of your return.
• You are in military or naval service on duty outside the Previous 2-month extension. If you cannot file your
United States and Puerto Rico. return within the automatic 2-month extension period, you
can generally get an additional 4 months to file your re-
If you use a calendar year, the regular due date of your
turn, for a total of 6 months. The 2-month period and the
return is April 15. Even if you are allowed an extension,
6-month period start at the same time. You have to re-
you will have to pay interest on any tax not paid by the reg-
quest the additional 4 months by the new due date al-
ular due date of your return.
lowed by the 2-month extension.
Married taxpayers. If you file a joint return, either you The additional 4 months of time to file (unlike the origi-
or your spouse can qualify for the automatic extension. If nal 2-month extension) is not an extension of time to pay.
you and your spouse file separate returns, this automatic You must make an accurate estimate of your tax based on
extension applies only to the spouse who qualifies for it. the information available to you. If you find you cannot pay
the full amount due with Form 4868, you can still get the
How to get the extension. To use this automatic
extension. You will owe interest on the unpaid amount
2-month extension, you must attach a statement to your
from the original due date of the return.
return explaining which of the two situations listed earlier
You may also be charged a penalty for paying the tax
qualified you for the extension.
late unless you have reasonable cause for not paying your
Automatic 6-month extension. If you are not able to file tax when due. Penalties for paying the tax late are as-
your return by the due date, you can generally get an auto- sessed from the original due date of your return, unless
matic 6-month extension of time to file (but not of time to you qualify for the automatic 2-month extension. In that sit-
pay). To get this automatic extension, you must file a pa- uation, penalties for paying late are assessed from the ex-
per Form 4868 or use IRS e-file (electronic filing). For tended due date of the payment (June 15 for calen-
more information about filing electronically, see E-file op- dar-year taxpayers).
tions, later.
Additional extension of time for taxpayers out of the
The form must show your properly estimated tax liability
country. In addition to the 6-month extension, taxpayers
based on the information available to you.
who are out of the country can request a discretionary
You may not be eligible. You cannot use the au- 2-month additional extension of time to file their returns (to
! tomatic 6-month extension of time to file if: December 15 for calendar year taxpayers).
CAUTION To request this extension, you must send the IRS a let-
• You want the IRS to figure your tax, or ter explaining the reasons why you need the additional 2
months. Send the letter by the extended due date (Octo-
• You are under a court order to file by the regular due ber 15 for calendar year taxpayers) to the following ad-
date.
dress:

E-file options. You can use e-file to get an extension Department of the Treasury
of time to file. You can either file Form 4868 electronically Internal Revenue Service
or you can pay part or all of your estimate of tax due using Austin, TX 73301-0045

Publication 54 (2023) Chapter 1 Filing Information 5

 You will not receive any notification from the IRS unless later meet either of the tests, you can claim the foreign
your request is denied. earned income exclusion, the foreign housing exclusion,
The discretionary 2-month additional extension is not or the foreign housing deduction on Form 1040-X.
available to taxpayers who have an approved extension of
time to file on Form 2350, discussed next. Foreign Currency
Extension of time to meet residency tests. You cannot
generally get an extension of more than 6 months. How- You must express the amounts you report on your U.S. tax
ever, if you are outside the United States and meet certain return in U.S. dollars. If you receive all or part of your in-
requirements, you may be able to get a longer extension. come, or pay some or all of your expenses, in foreign cur-
You can get an extension of more than 6 months to file rency, you must translate the foreign currency into U.S.
your tax return if you need the time to meet either the bona dollars. How you do this depends on your functional cur-
fide residence test or the physical presence test to qualify rency. Your functional currency is generally the U.S. dollar
for either the foreign earned income exclusion or the for- unless you are required to use the currency of a foreign
eign housing exclusion or deduction. The tests, the exclu- country.
sions, and the deduction are explained in chapter 4. You must make all federal income tax determinations in
You should request an extension if all three of the fol- your functional currency. The U.S. dollar is the functional
lowing apply. currency for all taxpayers except some qualified business
1. You are a U.S. citizen or resident alien. units (QBUs). A QBU is a separate and clearly identified
unit of a trade or business that maintains separate books
2. You expect to meet either the bona fide residence test and records.
or the physical presence test, but not until after your
tax return is due. Even if you have a QBU, your functional currency is the
3. Your tax home is in a foreign country (or countries) dollar if any of the following apply.
throughout your period of bona fide residence or • You conduct the business in U.S. dollars.
physical presence, whichever applies.
• The principal place of business is located in the Uni-
If you are granted an extension, it will generally be to 30 ted States.
days beyond the date on which you can reasonably ex- • You choose to or are required to use the U.S. dollar as
pect to qualify for an exclusion or deduction under either your functional currency.
the bona fide residence test or the physical presence test.
• The business books and records are not kept in the
How to get an extension. To obtain an extension, file currency of the economic environment in which a sig-
Form 2350 either by giving it to a local IRS representative nificant part of the business activities is conducted.
or other IRS employee or by mailing it to:
Make all income tax determinations in your functional
Department of the Treasury currency. If your functional currency is the U.S. dollar, you
Internal Revenue Service must immediately translate into U.S. dollars all items of in-
Austin, TX 73301-0045 come, expense, etc. (including taxes), that you receive,
pay, or accrue in a foreign currency and that will affect
You must file Form 2350 by the due date for filing your computation of your income tax. Use the exchange rate
return. Generally, if both your tax home and your abode prevailing when you receive, pay, or accrue the item. You
are outside the United States and Puerto Rico on the reg- can generally get exchange rates from banks and U.S.
ular due date of your return and you file on a calendar year Embassies. You may also need to recognize foreign cur-
basis, the due date for filing your return is June 15. rency gain or loss on certain foreign currency transac-
What if tests are not met. If you obtain an extension tions. See section 988 and the regulations thereunder.
and unforeseen events make it impossible for you to meet
If you have a QBU with a functional currency that is not
either the bona fide residence test or the physical pres-
the U.S. dollar, make all income determinations in the
ence test, you should file your income tax return as soon
QBU's functional currency, and, where appropriate, trans-
as possible because you must pay interest on any tax due
late such income or loss at the appropriate exchange rate.
after the regular due date of the return (even though an ex-
tension was granted).
Blocked Income
You should make any request for an extension
! early, so that if it is denied you still can file your re- You must generally report your foreign income in terms of
CAUTION turn on time. Otherwise, if you file late and addi-
U.S. dollars and, with one exception (see Fulbright Grant,
tional tax is due, you may be subject to a penalty. later), you must pay taxes due on it in U.S. dollars.
Return filed before test is met. If you file a return be- If, because of restrictions in a foreign country, your in-
fore you meet the bona fide residence test or the physical come is not readily convertible into U.S. dollars or into
presence test, you must include all income from both U.S. other money or property that is readily convertible into
and foreign sources and pay the tax on that income. If you

6 Chapter 1 Filing Information Publication 54 (2023)

U.S. dollars, your income is “blocked” or “deferrable” in- the currency of the host country to pay the part of the U.S.
come. You can report this income in one of the following tax that is based on the blocked income.
two ways.
Paying U.S. tax in foreign currency. To qualify for this
• Report the income and pay your federal income tax method of payment, you must prepare a statement that
with U.S. dollars that you have in the United States or shows the following information.
in some other country.
• You were a Fulbright grantee and were paid in noncon-
• Postpone the reporting of the income until it becomes vertible foreign currency.
unblocked.
• The total grant you received during the year and the
If you choose to postpone the reporting of the income, amount you received in nonconvertible foreign cur-
you must file an information return with your tax return. For rency.
this information return, you should use another Form 1040 • At least 70% of the grant was paid in nonconvertible
or 1040-SR labeled “Report of Deferrable Foreign Income, foreign currency.
pursuant to Rev. Rul. 74-351.” You must declare on the in-
The statement must be certified by the U.S. educational
formation return that you will include the deferrable in-
foundation or commission paying the grant or other per-
come in your taxable income for the year that it becomes
son having control of grant payments to you.
unblocked. You must also state that you waive any right to
You should prepare at least two copies of this state-
claim that the deferrable income was includible in your in-
ment. Attach one copy to your Form 1040 or 1040-SR and
come for any earlier year. For detailed information see
keep the other copy for identification purposes when you
Rev. Rul. 74-351, 1974-2 C.B. 144.
make a tax deposit of nonconvertible foreign currency.
You must report your income on your information return Figuring actual tax. When you prepare your income
using the foreign currency in which you received that in- tax return, you may owe tax or the entire liability may have
come. If you have blocked income from more than one for- been satisfied with your estimated tax payments. If you
eign country, include a separate information return for owe tax, figure the part due to (and payable in) the non-
each country. convertible foreign currency by using the following for-
mula.
Income becomes unblocked and reportable for tax pur-
poses when it becomes convertible, or when it is conver- Adjusted gross
income that is
ted, into U.S. dollars or into other money or property that is blocked income Tax on blocked
× Total U.S. tax =
convertible into U.S. currency. Also, if you use blocked in- income
Total adjusted
come for your personal expenses or dispose of it by gift, gross income
bequest, or devise, you must treat it as unblocked and re-
portable. You must attach all of the following to the return.
• A copy of the certified statement discussed earlier.
If you have received blocked income on which you have
not paid tax, you should check to see whether that income • A detailed statement showing the allocation of tax
is still blocked. If it is not, you should take immediate steps from amounts received in foreign currency and the
to pay tax on it, file a declaration or amended declaration rates of exchange used in determining your tax liability
of estimated tax, and include the income on your tax re- in U.S. dollars.
turn for the year in which the income became unblocked. • The original deposit receipt for any balance of tax due
that you paid in nonconvertible foreign currency.
If you choose to postpone reporting blocked income
and in a later tax year you wish to begin including it in Figuring estimated tax on nonconvertible foreign
gross income although it is still blocked, you must obtain currency. If you are liable for estimated tax (discussed
the permission of the IRS to do so. To apply for permis- later), figure the amount you can pay to the IRS in noncon-
sion, file Form 3115, Application for Change in Accounting vertible foreign currency using the following formula.
Method. You must also request permission from the IRS
Adjusted gross
on Form 3115 if you have not chosen to defer the report- income that is blocked
ing of blocked income in the past, but now wish to begin income
× Total estimated U.S. tax =
Estimated tax on
reporting blocked income under the deferred method. See Total adjusted
blocked income

the Instructions for Form 3115 for information on changing gross income
your accounting method.
If you must pay your host country income tax on your
grant, subtract any estimated foreign tax credit that ap-
Fulbright Grant plies to your grant from the estimated tax on the blocked
income.
All income must be reported in U.S. dollars. In most cases,
the tax must also be paid in U.S. dollars. If, however, at Deposit of foreign currency with disbursing officer.
least 70% of your Fulbright grant has been paid in noncon- Once you have determined the amount of the actual tax or
vertible foreign currency (blocked income), you can use estimated tax that you can pay in nonconvertible foreign

Publication 54 (2023) Chapter 1 Filing Information 7

currency, deposit that amount with the disbursing officer of Internal Revenue Service
the Department of State in the foreign country in which the P.O. Box 1303
foundation or commission paying the grant is located. Charlotte, NC 28201-1303 USA
Estimated tax installments. You can either deposit
If you do not know where your legal residence is and
the full estimated tax amount before the first installment
you do not have a principal place of business in the United
due date or make four equal payments before the install-
States, you can file with the appropriate address listed
ment due dates. See Estimated Tax Payments, later.
above.
Deposit receipt. Upon accepting the foreign currency,
However, you should not file with the addresses listed
the disbursing officer will give you a receipt in duplicate.
above if you are a bona fide resident of the U.S. Virgin Is-
The original of this receipt (showing the amount of foreign
lands, Guam, or the Commonwealth of the Northern Ma-
currency deposited and its equivalent in U.S. dollars)
riana Islands during your entire tax year.
should be attached to your Form 1040 or 1040-SR or pay-
ment voucher from Form 1040-ES. Keep the copy for your Resident of the U.S. Virgin Islands (USVI). If you are a
records. bona fide resident of the USVI during your entire tax year,
you are generally not required to file a U.S. return. How-
Does My Return Have To Be on ever, you must file a return with the USVI.
Paper? Send your return to:
IRS e-file (electronic filing) is the fast- Virgin Islands Bureau
est, easiest, and most convenient way of Internal Revenue
to file your income tax return electroni- 6115 Estate Smith Bay
cally. St. Thomas, Virgin Islands 00802
IRS e-file offers accurate, safe, and fast alternatives to fil-
ing on paper. IRS computers quickly and automatically
check for errors or other missing information. Non-USVI resident with USVI income. If you are a U.S.
citizen or resident alien and you have income from sour-
Note. Returns with a foreign address can be e-filed. ces in the USVI or income effectively connected with the
How to e-file. There are three ways conduct of a trade or business in the USVI, and you are
you can e-file. not a bona fide resident of the USVI during your entire tax
year, you must file identical tax returns with the United
1. Use your personal computer. States and the USVI. File the original return with the Uni-
ted States and file a signed copy of the U.S. return (includ-
2. Use a volunteer. Many programs offering free tax help ing all attachments, forms, and schedules) with the Virgin
can e-file your return. Islands Bureau of Internal Revenue.
3. Use a tax professional. Most tax professionals can You must complete Form 8689 and attach a copy to
e-file your return. both your U.S. return and your USVI return. You should file
your U.S. return with the address listed under Where To
These methods are explained in detail in the instructions File, earlier.
for your tax return. See Pub. 570 for information about filing U.S. Virgin Is-
lands returns.
Where To File Resident of Guam. If you are a bona fide resident of
Guam during your entire tax year, you should file a return
If any of the following situations apply to you, do not file with Guam.
your return with the service center listed for your home
state. Send your return to:
• You claim the foreign earned income exclusion. Department of Revenue and Taxation
• You claim the foreign housing exclusion or deduction. Government of Guam
P.O. Box 23607
• You live in a foreign country. GMF, GU 96921
Instead, use one of the following special addresses. If
you are not enclosing a check or money order, file your re-
However, if you have income from sources within Guam
turn with:
and you are a U.S. citizen or resident alien, but not a bona
Department of the Treasury fide resident of Guam during the entire tax year, you
Internal Revenue Service should file a return with the United States. Send your re-
Austin, TX 73301-0215 USA turn to the address listed under Where To File, earlier.
See Pub. 570 for information about filing Guam returns.
If you are enclosing a check or money order, file your re-
turn with:

8 Chapter 1 Filing Information Publication 54 (2023)

Resident of the Commonwealth of the Northern Ma- for the year they make the choice, they can file either joint
riana Islands (CNMI). If you are a bona fide resident of or separate returns for later years.
the CNMI during your entire tax year, you should file a re-
turn with the CNMI. Example 2. When Bob and Sharon Williams got mar-
ried, both were nonresident aliens. In June of last year,
Send your return to: Bob became a resident alien and remained a resident for
Division of Revenue and Taxation the rest of the year. Bob and Sharon both choose to be
Commonwealth of the Northern Mariana Islands treated as resident aliens by attaching a statement to their
P.O. Box 5234, CHRB joint return for last year. Bob and Sharon must report their
Saipan, MP 96950 worldwide income for last year and all later years unless
the choice is ended or suspended. Bob and Sharon must
file a joint return for last year, but they can file either joint
However, if you have income from sources within the or separate returns for later years.
CNMI and you are a U.S. citizen or resident alien, but not
If you do not choose to treat your nonresident
a bona fide resident of the CNMI during the entire tax year,
you should file a return with the United States. Send your TIP alien spouse as a U.S. resident, you may be able
to use head of household filing status. To use this
return to the address listed under Where To File, earlier.
status, you must pay more than half the cost of maintain-
See Pub. 570 for information about filing CNMI returns.
ing a household for certain dependents or relatives other
Note. Puerto Rico and American Samoa have their own than your nonresident alien spouse. For more information,
separate and independent tax systems. Although their tax see Pub. 501.
laws are modeled on the U.S. Internal Revenue Code,
there are certain differences in law and tax rates. See Pub.
570 for information about tax obligations in Puerto Rico
Social Security Number (SSN)
and American Samoa. If you choose to treat your nonresident alien spouse as a
U.S. resident, your spouse must have either an SSN or an
individual taxpayer identification number (ITIN).
Nonresident Alien Spouse To get an SSN for a nonresident alien spouse, apply at
Treated as a Resident an office of the U.S. Social Security Administration (SSA)
or U.S. consulate. For more information go to SSA.gov or
If, at the end of your tax year, you are married and one call 800-772-1213.
spouse is a U.S. citizen or resident alien and the other is a If the nonresident alien spouse is not eligible to get an
nonresident alien, you can choose to treat the nonresident SSN, the spouse can file Form W-7 with the IRS to apply
as a U.S. resident. This election includes situations in for an ITIN when you timely file the joint return on which
which one of you is a nonresident alien at the beginning of you choose to treat your nonresident alien spouse as a
the tax year and a resident alien at the end of the year and U.S. resident. Follow the Instructions for Form W-7 to sub-
the other is a nonresident alien at the end of the year. mit your Form W-7 and file your return.
If you make this choice, the following two rules apply.
Individual taxpayer identification number (ITIN) re-
• You and your spouse are treated, for income tax pur- newal. Your spouse may need to renew the ITIN. For
poses and purposes of wage withholding, as U.S. resi- more information, go to IRS.gov/ITIN.
dents for the tax year in which the election is made
and all future tax years until the election is terminated
or suspended because neither spouse is a citizen or
How To Make the Choice
resident of the United States at any time during a year. Attach a statement, signed by both spouses, to your joint
• You must file a joint income tax return for the year you return for the first tax year for which the choice applies. It
make the choice and attach a statement as described should contain the following.
under How To Make the Choice, later.
• A declaration that one spouse was a nonresident alien
This means that neither of you can claim under any tax and the other spouse a U.S. citizen or resident alien
treaty not to be a U.S. resident for a tax year for which the on the last day of your tax year and that you choose to
choice is in effect. be treated as U.S. residents for the entire tax year.
Example 1. Pat Smith, a U.S. citizen, is married to • The name, address, and SSN (or ITIN) of each
Norman, a nonresident alien. Pat and Norman make the spouse. (If one spouse died, include the name and
choice to treat Norman as a resident alien by attaching a address of the person making the choice for the de-
statement to their joint return. Pat and Norman must report ceased spouse.)
their worldwide income for the year they make the choice You generally make this choice when you file your joint
and for all later years unless the choice is ended or sus- return. However, you can also make the choice by filing a
pended. Although Pat and Norman must file a joint return joint amended return on Form 1040-X. Attach Form 1040
or 1040-SR and enter “Amended” across the top of the

Publication 54 (2023) Chapter 1 Filing Information 9

amended return. If you make the choice with an amended
return, you and your spouse must also amend any returns
that you may have filed after the year for which you made
Estimated Tax Payments
the choice.
The requirements for determining who must pay estimated
You must generally file the amended joint return within tax are the same for a U.S. citizen or resident abroad as
3 years from the date you filed your original U.S. income for a taxpayer in the United States.
tax return or 2 years from the date you paid your income
In general, you don’t have to make estimated tax pay-
tax for that year, whichever is later.
ments if you expect that your 2024 Form 1040 or 1040-SR
will show a tax refund or a tax balance due of less than
$1,000. For more information on whether you are required
Suspending the Choice to make estimated tax payments see Form 1040-ES and
Estimated Tax for 2023 in Pub. 505 (2024).
The choice to be treated as a resident alien does not ap-
ply to any later tax year if neither of you is a U.S. citizen or Foreign earned income exclusion. When figuring your
resident alien at any time during the later tax year. estimated gross income, subtract amounts you expect to
exclude under the foreign earned income exclusion and
Example. Dick Brown was a resident alien on Decem- the foreign housing exclusion. In addition, you can reduce
ber 31, 2020, and married to Judy, a nonresident alien. your income by your estimated foreign housing deduction.
They chose to treat Judy as a resident alien and filed joint However, you must estimate tax on your nonexcluded in-
income tax returns for 2020 and 2021. On January 10, come using the tax rates that will apply had you not exclu-
2022, Dick became a nonresident alien. Judy had re- ded the income. If the actual amount of the exclusion or
mained a nonresident alien. Because Dick was a resident deduction is less than you estimate, you may have to pay
alien during part of 2022, Dick and Judy can file joint or a penalty for underpayment of estimated tax.
separate returns for that year. Neither Dick nor Judy was a For more information, see the Instructions for Form
resident alien at any time during 2023 and their choice is 2555.
suspended for that year. For 2023, both are treated as
nonresident aliens. If Dick becomes a resident alien again
in 2024, their choice is no longer suspended and both are
treated as resident aliens. Other Forms You May Have To
File
Ending the Choice
FinCEN Form 114. You must file FinCEN Form 114, Re-
Once made, the choice to be treated as a resident applies port of Foreign Bank and Financial Accounts (FBAR), if
to all later years unless suspended (as explained earlier) you had any financial interest in, or signature or other au-
or ended in one of the ways shown in Table 1-1. thority over, a bank, securities, or other financial account
in a foreign country. You do not need to file the report if the
If the choice is ended for any of the reasons listed in Ta- assets are with a U.S. military banking facility operated by
ble 1-1, neither spouse can make a choice in any later tax a financial institution or if the combined assets in the ac-
year. count(s) are $10,000 or less during the entire year.
Table 1-1. Options for Ending the Choice To Treat Nonresident Alien Spouse as a Resident
Revocation Either spouse can revoke the choice for any tax year.
The revocation must be made by the due date for filing the tax return for that tax year.
The spouse who revokes the choice must attach a signed statement declaring that the choice is being revoked. The statement
revoking the choice must include the following.
• The name, address, and SSN (or TIN) of each spouse.
• The name and address of any person who is revoking the choice for a deceased spouse.
• A list of any states, foreign countries, and U.S. territories that have community property laws in which either spouse is
domiciled or where real property is located from which either spouse receives income.
If the spouse revoking the choice does not have to file a return and does not file a claim for refund, send the statement to the Internal
Revenue Service Center where the last joint return was filed.

Death The death of either spouse ends the choice, beginning with the first tax year following the year in which the spouse died.
If the qualifying surviving spouse is a U.S. citizen or resident alien and is entitled to the joint tax rates as a qualifying surviving
spouse, the choice will not end until the close of the last year for which these joint rates may be used.
If both spouses die in the same tax year, the choice ends on the first day after the close of the tax year in which the spouses died.

Divorce or legal A divorce or legal separation ends the choice as of the beginning of the tax year in which the legal separation occurs.
separation

Inadequate records The IRS can end the choice for any tax year that either spouse has failed to keep adequate books, records, and other
information necessary to determine the correct income tax liability, or to provide adequate access to those records.

10 Chapter 1 Filing Information Publication 54 (2023)

 FinCEN Form 114 is filed electronically with the Finan- Useful Items
cial Crimes Enforcement Network (FinCEN). The due date You may want to see:
for FBAR filings is April 15. FinCEN will grant an automatic
extension to October 15 if you are unable to meet the Publication
FBAR annual due date of April 15. The FBAR due date for
foreign financial accounts maintained during calendar 505 Tax Withholding and Estimated Tax
505

year 2023 is April 15, 2024, to coincide with the filing date Form (and Instructions)
for the 2023 Form 1040 or 1040-SR. For more information,
go to irs.gov/businesses/small-businesses-self-employed/ 673 Statement for Claiming Exemption From
Withholding on Foreign Earned Income Eligible
673

report-of-foreign-bank-and-financial-accounts-fbar.l.
for the Exclusion Provided by Section 911
FinCEN Form 105. You must file FinCEN Form 105, Re- W-4 Employee's Withholding Allowance Certificate
port of International Transportation of Currency or Mone-
W-4

tary Instruments, if you physically transport, mail, ship, or W-9 Request for Taxpayer Identification Number and
Certification
W-9

cause to be physically transported, mailed, or shipped,

into or out of the United States, currency or other mone- See chapter 7 for information about getting this publication
tary instruments totaling more than $10,000 at one time. and these forms.
Certain recipients of currency or monetary instruments
must also file FinCEN Form 105.
More information about the filing of FinCEN Form 105
can be found in the instructions on the back of the form, Income Tax Withholding
available at fincen.gov/sites/default/files/shared/
fin105_cmir.pdf. U.S. employers must generally withhold U.S. income tax
from the pay of U.S. citizens working abroad unless the
Form 8938. You must file Form 8938 to report the owner- employer is required by foreign law to withhold foreign in-
ship of specified foreign financial assets if the total value come tax.
of those assets exceeds an applicable threshold amount
(the “reporting threshold”). The reporting threshold varies Foreign earned income exclusion. Your employer
depending on whether you live in the United States, are does not have to withhold U.S. income taxes from wages
married, or file a joint income tax return with your spouse. you earn abroad if it is reasonable to believe that you will
Specified foreign financial assets include any financial ac- exclude them from income under the foreign earned in-
count maintained by a foreign financial institution and, to come exclusion or the foreign housing exclusion.
the extent held for investment, any stock, securities, or any Your employer should withhold taxes from any wages
other interest in a foreign entity and any financial instru- you earn for working in the United States.
ment or contract with an issuer or counterparty that is not Statement. You can give a statement to your employer
a U.S. person. indicating that you expect to qualify for the foreign earned
You may have to pay penalties if you are required to file income exclusion under either the bona fide residence test
Form 8938 and fail to do so, or if you have an understate- or the physical presence test and indicating your estima-
ment of tax due to any transaction involving an undis- ted housing cost exclusion.
closed foreign financial asset. Form 673 is an acceptable statement. You can use
More information about the filing of Form 8938 can be Form 673 only if you are a U.S. citizen. You do not have to
found in the separate Instructions for Form 8938. use the form and can prepare your own statement. For
more information, go to IRS.gov/Form 673.
Generally, your employer can stop the withholding once
you submit the statement that includes a declaration that
the statement is made under penalties of perjury. How-
ever, if your employer has reason to believe that you will
2. not qualify for either the foreign earned income or the for-
eign housing exclusion, your employer must continue to
withhold.
Withholding Tax Your employer must consider any information about pay
you received from any other source outside the United
States in determining whether your foreign earned income
Topics
is more than the limit on either the foreign earned income
This chapter discusses:
exclusion or the foreign housing exclusion.
• Withholding income tax from the pay of U.S. citizens, Foreign tax credit. If you plan to take a foreign tax credit,
• Withholding tax at a flat rate, and you may be able to adjust your withholding on Form W-4.
You can take these additional tax credits only for foreign
• Social security and Medicare taxes. tax credits attributable to taxable salary or wage income.
For more information, see the instructions for Step 3 of
Form W-4.

Publication 54 (2023) Chapter 2 Withholding Tax 11

Withholding from pension payments. U.S. payers of have not claimed benefits for the tax year under an in-
benefits from employer-deferred compensation plans, in- come tax treaty as a nonresident alien.”
dividual retirement plans, and commercial annuities must
generally withhold income tax from payments delivered
outside of the United States. You can choose exemption
from withholding if you:
Social Security and Medicare
• Provide the payer of the benefits with a residence ad- Taxes
dress in the United States or a U.S. territory, or
Social security and Medicare taxes may apply to wages
• Certify to the payer that you are not a U.S. citizen or paid to an employee regardless of where the services are
resident alien or someone who left the United States performed.
to avoid tax.

Check your withholding. Before you report U.S. income General Information
tax withholding on your tax return, you should carefully re-
view all information documents, such as Form W-2 and In general, U.S. social security and Medicare taxes do not
the Form 1099 information returns. Compare other re- apply to wages for services you perform as an employee
cords, such as final pay records or bank statements, with outside the United States unless one of the following ex-
Form W-2 or Form 1099 to verify the withholding on these ceptions applies.
forms. Check your U.S. income tax withholding even if you 1. You perform the services on or in connection with an
pay someone else to prepare your tax return. You may be American vessel or aircraft (defined later) and either:
assessed penalties and interest if you claim more than
your correct amount of withholding allowances. a. You entered into your employment contract within
the United States, or
b. The vessel or aircraft touches at a U.S. port while
30% Flat Rate Withholding you are employed on it.
2. The service is designated as employment for U.S. so-
Generally, U.S. source gross income that is not effectively cial security and Medicare tax purposes under a bilat-
connected to a U.S. trade or business, such as U.S. eral social security (totalization) agreement (dis-
source dividends and royalties, is subject to withholding cussed later).
tax at a flat 30% (or lower treaty) rate if paid to nonresident
aliens. If you are a U.S. citizen or resident alien and this 3. You are working for an American employer (defined
tax is withheld in error from payments to you because you later).
have a foreign address, you should notify the payer of the 4. You are working for a foreign affiliate (defined later) of
income to stop the withholding. Use Form W-9 to notify an American employer under a voluntary agreement
the payer. entered into between the American employer and the
You can claim the tax withheld in error as a withholding U.S. Department of the Treasury.
credit on your tax return if the amount isn’t adjusted by the
payer. See the Instructions for Form 1040 for how to claim American vessel or aircraft. An American vessel is any
the credit. vessel documented or numbered under the laws of the
United States and any other vessel whose crew is em-
Social security benefits paid to residents. If you are a ployed solely by one or more U.S. citizens, residents, or
lawful permanent resident (green card holder) and a flat corporations. An American aircraft is an aircraft registered
30% tax was withheld in error on your social security ben- under the laws of the United States.
efits, you must file a Form 1040 or 1040-SR with the Inter-
nal Revenue Service Center at the address listed under American employer. An American employer includes
Where To File, earlier, to determine if you are entitled to a any of the following.
refund. The following information must be submitted with • The U.S. Government or any of its instrumentalities.
your Form 1040 or 1040-SR.
• An individual who is a resident of the United States.
• A copy of Form SSA-1042S, Social Security Benefit
Statement. • A partnership of which at least two-thirds of the part-
ners are U.S. residents.
• A copy of your “green card.”
• A trust of which all the trustees are U.S. residents.
• A signed declaration that includes the following state-
ments. • A corporation organized under the laws of the United
States, any U.S. state, or the District of Columbia, Pu-
“I am a U.S. lawful permanent resident and my green
erto Rico, the U.S. Virgin Islands, Guam, or American
card has been neither revoked nor administratively or
Samoa.
judicially determined to have been abandoned. I am
filing a U.S. income tax return for the tax year as a res- An American employer also includes any foreign per-
ident alien reporting all of my worldwide income. I son with an employee who is performing services in con-
nection with a contract between the U.S. Government (or

12 Chapter 2 Withholding Tax Publication 54 (2023)

any instrumentality thereof) and a member of a domesti- Covered by United States only. If your pay in a foreign
cally controlled group of entities which includes such for- country is subject only to U.S. social security tax and is ex-
eign person. empt from foreign social security tax, your employer
should get a certificate of coverage from the SSA’s Office
Foreign affiliate. A foreign affiliate of an American em- of Earnings and International Operations. Employers can
ployer is any foreign entity in which the American em- request a certificate of coverage online at SSA.gov/
ployer has at least a 10% interest, directly or through one international/CoC_link.html.
or more entities. For a corporation, the 10% interest must
be in its voting stock. For any other entity, the 10% interest Covered by foreign country only. If you are perma-
must be in its profits. nently working in a foreign country with which the United
Form 2032 is used by American employers to extend States has a social security agreement and, under the
social security coverage to U.S. citizens and resident ali- agreement, your pay is exempt from U.S. social security
ens working abroad for foreign affiliates of American em- tax, you or your employer should get a statement from the
ployers. Once you enter into an agreement, coverage can- authorized official or agency of the foreign country verify-
not be terminated. ing that your pay is subject to social security coverage in
that country.
Excludable meals and lodging. Social security tax If the authorities of the foreign country will not issue
doesn’t apply to the value of meals and lodging provided such a statement, either you or your employer should get
to you for the convenience of your employer if it is reason- a statement from the U.S. SSA’s Office of Earnings and In-
able to believe that you will be able to exclude the value ternational Operations at the website listed earlier. The
from your income. statement should indicate that your wages aren’t covered
by the U.S. social security system.
Bilateral Social Security (Totalization) This statement should be kept by your employer be-
Agreements cause it establishes that your pay is exempt from U.S. so-
cial security tax.
Only wages paid on or after the effective date of the to-
The United States has entered into agreements with some
talization agreement can be exempt from U.S. social se-
foreign countries to coordinate social security coverage
curity tax.
and taxation of workers who are employed in those coun-
tries. These agreements are commonly referred to as “to-
talization agreements.” Under these agreements, dual
coverage and dual contributions (taxes) for the same work
are eliminated. The agreements generally make sure that
you pay social security taxes to only one country.
3.
Generally, under these agreements, you will only be
subject to social security taxes in the country where you
are working. However, if you are temporarily sent to work Self-Employment Tax
in a foreign country and your pay would otherwise be sub-
ject to social security taxes in both the United States and Topics
that country, you can generally remain covered only by This chapter discusses:
U.S. social security.

You can get more information on specific agreements at • Who must pay self-employment tax,
SSA.gov/International/ Agreement and IRS.gov/ • Who is exempt from self-employment tax,
TotalizationAgreements.
• Who can defer self-employment tax payments, and
You can write to:
• Which self-employed individuals can take the
Social Security Administration refundable income tax credits for sick and family
Office of Data Exchange leave.
and International Agreements
6401 Security Blvd., 4700 Annex Useful Items
Baltimore, MD 21235 You may want to see:

Publication
You may also contact the Office of Earnings and
334 Tax Guide for Small Business
International Operations by phone if you speak
334

English. You can call the office at 410-965-0160. 517 Social Security and Other Information for
Members of the Clergy and Religious Workers
517

You will need to pay for the call because it is not a toll-free
service for calls from outside the United States. If you call,
please do so between 9:00 a.m. and 4:00 p.m. Eastern
U.S. Time.

Publication 54 (2023) Chapter 3 Self-Employment Tax 13

 Form (and Instructions) $68,000, even though you are qualified for the foreign
earned income exclusion.
Formulario 1040-PR Planilla para la Declaración de
la Contribución Federal sobre el Trabajo por
Formulario 1040-PR

Cuenta Propia Members of the Clergy

Form 1040-SS U.S. Self-Employment Tax Return
Form 1040-SS

If you are a member of the clergy, you are treated as

Form 4361 Application for Exemption From self-employed for self-employment tax purposes. Your
Self-Employment Tax for Use by Ministers, U.S. self-employment tax is based upon net earnings from
Form 4361

Members of Religious Orders and Christian self-employment figured without regard to the foreign
Science Practitioners earned income exclusion or the foreign housing exclusion.
Schedule SE (Form 1040) Self-Employment Tax You can receive exemption from coverage for your min-
isterial duties if you conscientiously oppose public insur-
Schedule SE (Form 1040)

See chapter 7 for information about getting these publica-

ance due to religious reasons or if you oppose it due to the
tions and forms.
religious principles of your denomination. You must file
Form 4361 to apply for this exemption.

Who Must Pay This subject is discussed in further detail in Pub. 517.

Self-Employment Tax? Income From U.S. Territories

If you are a self-employed U.S. citizen or resident, the If you are a U.S. citizen or resident alien and you own and
rules for paying self-employment tax are generally the operate a business in a U.S. territory (Puerto Rico, Guam,
same whether you are living in the United States or the Commonwealth of the Northern Mariana Islands,
abroad. American Samoa, or the U.S. Virgin Islands), you must
pay tax on your net earnings from self-employment (if they
The self-employment tax is a social security and Medi-
are $400 or more) from those sources. You must pay the
care tax on net earnings from self-employment. You must
self-employment tax whether or not the income is exempt
pay self-employment tax if your net earnings from self-em-
from U.S. income taxes (or whether or not you must other-
ployment are at least $400.
wise file a U.S. income tax return). Unless your situation is
For 2023, the maximum amount of net earnings from described below, attach Schedule SE (Form 1040) to your
self-employment that is subject to the social security por- U.S. income tax return.
tion of the tax is $160,200. All net earnings are subject to
If you do not have to file Form 1040 or 1040-SR with the
the Medicare portion of the tax. Additional Medicare Tax
United States and you are a resident of any of the U.S. ter-
may apply to you if your net earnings from self-employ-
ritories listed in the preceding paragraph, figure your
ment exceed a threshold amount (based on your filing sta-
self-employment tax on Form 1040-SS. Residents of Pu-
tus).
erto Rico may file the Spanish-language Formulario
1040-PR.
Employed by a U.S. Church
If you are not enclosing a check or money order, file
If you were employed by a U.S. church or a qualified your return with:
church-controlled organization that chose exemption from
social security and Medicare taxes and you received wa- Department of the Treasury
ges of $108.28 or more from the organization, the Internal Revenue Service
amounts paid to you are subject to self-employment tax. Austin, TX 73301-0215
However, you can choose to be exempt from social secur-
ity and Medicare taxes if you are a member of a recog- If you are enclosing a check or money order, file your
nized religious sect. See Pub. 517 for more information return with:
about church employees and self-employment tax.
Internal Revenue Service
P.O. Box 1303
Effect of Exclusion Charlotte, NC 28201-1303
You must take all of your self-employment income into ac-
count in figuring your net earnings from self-employment,
even income that is exempt from income tax because of Exemption From Dual-Country
the foreign earned income exclusion.
Social Security and Medicare
Example. You are in business abroad as a consultant
and qualify for the foreign earned income exclusion. Your Taxes
foreign earned income is $95,000, your business deduc-
tions total $27,000, and your net profit is $68,000. You The United States may reach agreements with foreign
must pay self-employment tax on your net profit of countries to eliminate dual coverage and dual

14 Chapter 3 Self-Employment Tax Publication 54 (2023)

contributions (taxes) to social security systems for the 2555 Foreign Earned Income
same work. See Bilateral Social Security (Totalization)
2555

See chapter 7 for information about getting these publica-

Agreements in chapter 2 under Social Security and Medi- tions and forms.
care Taxes. As a general rule, self-employed persons who
are subject to dual taxation will only be covered by the so-
cial security system of the country where they reside. For
more information on how a specific agreement affects Who Qualifies for the
self-employed persons, see Bilateral Social Security (To-
talization) Agreements in chapter 2. Exclusions and the Deduction?
If your self-employment earnings should be exempt If you meet certain requirements, you may qualify for the
from foreign social security tax and subject only to U.S. foreign earned income exclusion and foreign housing ex-
self-employment tax, you should request a certificate of clusion or the foreign housing deduction.
coverage from the U.S. SSA’s Office of Earnings and Inter- If you are a U.S. citizen or resident alien and you live
national Operations. The certificate will establish your ex- abroad, you are taxed on your worldwide income. How-
emption from the foreign social security tax. ever, you may qualify to exclude from income up to
$120,000 of your foreign earnings. In addition, you can ex-
You can request a certificate of coverage online at
clude or deduct certain foreign housing amounts. See For-
SSA.gov/international/CoC_link.html.
eign Earned Income Exclusion and Foreign Housing Ex-
clusion and Deduction, later.
You may also be entitled to exclude from income the
value of meals and lodging provided to you by your em-
ployer. See Exclusion of Meals and Lodging, later.
4.
Requirements
Foreign Earned Income
To claim the foreign earned income exclusion and the for-
and Housing: Exclusion – eign housing exclusion, or the foreign housing deduction,
you must meet all three of the following requirements:
Deduction 1. Your tax home must be in a foreign country.
2. You must have foreign earned income.
Topics
This chapter discusses: 3. You must be one of the following.
a. A U.S. citizen who is a bona fide resident of a for-
• Who qualifies for the foreign earned income exclusion eign country or countries for an uninterrupted pe-
and the foreign housing exclusion or the foreign riod that includes an entire tax year.
housing deduction;
b. A U.S. resident alien who is a citizen or national of
• The requirements that must be met to claim either of a country with which the United States has an in-
the exclusions or the deduction; come tax treaty in effect and who is a bona fide
• How to determine the amount of the foreign earned resident of a foreign country or countries for an un-
income exclusion; and interrupted period that includes an entire tax year.
• How to determine the amount of foreign housing c. A U.S. citizen or a resident alien who is physically
exclusion and the foreign housing deduction. present in a foreign country or countries for at
least 330 full days during any period of 12 consec-
Useful Items utive months.
You may want to see: See Pub. 519 to find out if you are a U.S. resident alien
for tax purposes and whether you keep that alien status
Publication when you temporarily work abroad.
519 U.S. Tax Guide for Aliens If you are a nonresident alien married to a U.S. citizen
or resident alien, and both you and your spouse choose to
519

570 Tax Guide for Individuals With Income From treat you as a resident alien, you are a resident alien for
U.S. Possessions
570

tax purposes. For information on making the choice, see

596 Earned Income Credit (EIC) the discussion in chapter 1 under Nonresident Alien
Spouse Treated as a Resident.
596

Form (and Instructions)

Waiver of minimum time requirements. The minimum
1040-X Amended U.S. Individual Income Tax Return
1040-X time requirements for bona fide residence and physical

Publication 54 (2023) Chapter 4 Foreign Earned Income and Housing: 15

Exclusion – Deduction
presence can be waived if you must leave a foreign coun- Example 2. For several years, you were a marketing
try because of war, civil unrest, or similar adverse condi- executive with a producer of machine tools in Toledo,
tions in that country. This is fully explained under Waiver of Ohio. In November of last year, your employer transferred
Time Requirements, later. you to London, England, for a minimum of 18 months to
See Figure 4-A and information in this chapter to deter- set up a sales operation for Europe. Before you left, you
mine if you are eligible to claim either one of the exclu- distributed business cards showing your business and
sions or the deduction. home addresses in London. You kept ownership of your
home in Toledo but rented it to another family. You placed
Tax Home in Foreign Country your car in storage. In November of last year, you moved
your spouse, children, furniture, and family pets to a home
To qualify for the foreign earned income exclusion and the your employer rented for you in London.
foreign housing exclusion, or the foreign housing deduc- Shortly after moving, you leased a car and you and
tion, your tax home must be in a foreign country through- your spouse got British driver’s licenses. Your entire family
out your period of bona fide residence or physical pres- got library cards for the local public library. You and your
ence abroad. See Bona Fide Residence Test and Physical spouse opened bank accounts with a London bank and
Presence Test, later. secured consumer credit. You joined a local business lea-
gue and both you and your spouse became active in the
Tax Home neighborhood civic association and worked with a local
charity. Your abode is in London for the time you live there.
Your tax home is the general area of your main place of You satisfy the tax home test in the foreign country.
business, employment, or post of duty, regardless of
Service in a combat zone. U.S. citizens or residents
where you maintain your family home. Your tax home is
serving in an area designated by the President of the Uni-
the place where you are permanently or indefinitely en-
ted States by Executive Order as a combat zone for pur-
gaged to work as an employee or self-employed individ-
poses of section 112 in support of the U.S. Armed Forces
ual. Having a “tax home” in a given location doesn’t nec-
can qualify as having a tax home in a foreign country, even
essarily mean that the given location is your residence or
if they have an abode within the United States. For a list of
domicile for tax purposes.
IRS-recognized combat zones, go to IRS.gov/Newsroom/
If you do not have a regular or main place of business Combat-Zones.
because of the nature of your work, your tax home may be
the place where you regularly live. If you have neither a
regular or main place of business nor a place where you Temporary or Indefinite Assignment
regularly live, you are considered an itinerant and your tax
home is wherever you work. The location of your tax home often depends on whether
your assignment is temporary or indefinite. If you are tem-
You aren’t considered to have a tax home in a foreign porarily absent from your tax home in the United States on
country for any period in which your abode is in the United business, you may be able to deduct your
States, unless you are serving in support of the U.S. away-from-home expenses (for travel, meals, and lodg-
Armed Forces in an area designated as a combat zone. ing), but you wouldn’t qualify for the foreign earned in-
See Service in a combat zone, later. Otherwise, if your come exclusion. If your new work assignment is for an in-
abode is in the United States, you will not meet the tax definite period, your new place of employment becomes
home test and cannot claim the foreign earned income ex- your tax home and you wouldn’t be able to deduct any of
clusion. the related expenses that you have in the general area of
this new work assignment. If your new tax home is in a for-
The location of your abode is based on where you eign country and you meet the other requirements, your
maintain your family, economic, and personal ties. Your earnings may qualify for the foreign earned income exclu-
abode is not necessarily in the United States merely be- sion.
cause you maintain a dwelling in the United States,
whether or not your spouse or dependents use the dwell- If you expect your employment away from home in a
ing. Your abode is also not necessarily in the United single location to last, and it does last, for 1 year or less, it
States while you are temporarily in the United States; how- is temporary unless facts and circumstances indicate oth-
ever, these factors can contribute to your having an abode erwise.
in the United States.
If you expect it to last for more than 1 year, it is indefi-
Example 1. You are employed on an offshore oil rig in
nite.
the territorial waters of a foreign country and work a
28-day on/28-day off schedule. You return to your family
residence in the United States during your off periods. You If you expect it to last for 1 year or less, but at some
are considered to have an abode in the United States and later date you expect it to last longer than 1 year, it is tem-
don’t satisfy the tax home test in the foreign country. You porary (in the absence of facts and circumstances indicat-
can’t claim either of the exclusions or the housing deduc- ing otherwise) until your expectation changes. Once your
tion. expectation changes, it is indefinite.

16 Chapter 4 Foreign Earned Income and Housing: Publication 54 (2023)

Exclusion – Deduction
 Figure 4-A. Can I Claim Either Exclusion or the Deduction?

Start Here
Yes Yes No No
Do you have foreign Is your tax home in a Are you a U.S. resident
Are you a U.S. citizen?
earned income? foreign country? alien?

No No Yes Yes

Were you a bona fide Are you a citizen or

resident of a foreign national of a country
Yes
country or countries with which the United
for an uninterrupted States has an income
period that includes an tax treaty in effect?
entire tax year?

No Yes No

You CAN claim the

foreign earned income
exclusion and the
foreign housing
exclusion or the foreign
housing deduction.*

Were you physically

present in a foreign
country or countries for Yes
at least 330 full days
during any period of 12
consecutive months?

No

You CANNOT claim the foreign earned income exclusion, the

foreign housing exclusion, or the foreign housing deduction.

* Foreign housing exclusion applies only to employees. Foreign housing deduction applies only to the self-employed.

Foreign Country States and those areas listed or described in the previous
sentence.
To meet the bona fide residence test or the physical pres-
ence test, you must live in or be present in a foreign coun- American Samoa, Guam, and the
try. A foreign country includes any territory under the sov- Commonwealth of the Northern Mariana
ereignty of a government other than that of the United Islands
States.
Residence or presence in a U.S. territory doesn’t qualify
The term “foreign country” includes the country's air- you for the foreign earned income exclusion. You may,
space and territorial waters, but not international waters however, qualify for an exclusion of your territory income
and the airspace above them. It also includes the seabed on your U.S. return.
and subsoil of those submarine areas adjacent to the
country's territorial waters over which it has exclusive American Samoa. There is a territory exclusion available
rights under international law to explore and exploit the to individuals who are bona fide residents of American Sa-
natural resources. moa for the entire tax year. Gross income from sources
within American Samoa may be eligible for this exclusion.
The term “foreign country” doesn’t include Antarctica or Income that is effectively connected with the conduct of a
U.S. territories such as Puerto Rico, Guam, the Common- trade or business within American Samoa may also be eli-
wealth of the Northern Mariana Islands, the U.S. Virgin Is- gible for this exclusion. Use Form 4563 to figure the exclu-
lands, and American Samoa. For purposes of the foreign sion.
earned income exclusion, the foreign housing exclusion,
and the foreign housing deduction, the terms “foreign,” Guam and the Commonwealth of the Northern Ma-
“abroad,” and “overseas” refer to areas outside the United riana Islands. An exclusion will be available to residents

Publication 54 (2023) Chapter 4 Foreign Earned Income and Housing: 17

Exclusion – Deduction
of Guam and the Commonwealth of the Northern Mariana country, even though you intend to return eventually to the
Islands if, and when, new implementation agreements United States.
take effect between the United States and those territo- You are clearly not a resident of Scotland in the first in-
ries. stance. However, in the second, you are a resident be-
For more information, see Pub. 570. cause your stay in Scotland appears to be permanent. If
your residency is not as clearly defined as either of these
Puerto Rico and the U.S. Virgin Islands illustrations, it may be more difficult to decide whether you
have established a bona fide residence.
Residents of Puerto Rico and the U.S. Virgin Islands can’t Determination. Questions of bona fide residence are
claim the foreign earned income exclusion or the foreign determined according to each individual case, taking into
housing exclusion. account factors such as your intention, the purpose of
your trip, and the nature and length of your stay abroad.
Puerto Rico. Generally, if you are a U.S. citizen who is a
To meet the bona fide residence test, you must show
bona fide resident of Puerto Rico for the entire tax year,
the IRS that you have been a bona fide resident of a for-
you aren’t subject to U.S. tax on income from Puerto Rican
eign country or countries for an uninterrupted period that
sources. This doesn’t include amounts paid for services
includes an entire tax year. The IRS decides whether you
performed as an employee of the United States. However,
are a bona fide resident of a foreign country largely on the
you are subject to U.S. tax on your income from sources
basis of facts you report on Form 2555. The IRS cannot
outside Puerto Rico. In figuring your U.S. tax, you can’t de-
make this determination until you file Form 2555.
duct expenses allocable to income not subject to tax.
Statement to foreign authorities. You aren’t considered
Bona Fide Residence Test a bona fide resident of a foreign country if you make a
statement to the authorities of that country that you aren’t
You meet the bona fide residence test if you are a bona a resident of that country, and the authorities:
fide resident of a foreign country or countries for an unin- • Hold that you aren’t subject to their income tax laws as
terrupted period that includes an entire tax year. You can a resident, or
use the bona fide residence test to qualify for the exclu-
sions and the deduction only if you are either: • Haven’t made a final decision on your status.
• A U.S. citizen, or Special agreements and treaties. An income tax ex-
• A U.S. resident alien who is a citizen or national of a emption provided in a treaty or other international agree-
country with which the United States has an income ment won’t in itself prevent you from being a bona fide res-
tax treaty in effect. ident of a foreign country. Whether a treaty prevents you
from becoming a bona fide resident of a foreign country is
You do not automatically acquire bona fide resident sta- determined under all provisions of the treaty, including
tus merely by living in a foreign country or countries for 1 specific provisions relating to residence or privileges and
year. If you go to a foreign country to work on a particular immunities.
job for a specified period of time, you won’t ordinarily be
regarded as a bona fide resident of that country even Example 1. You are a U.S. citizen employed in the Uni-
though you work there for 1 tax year or longer. The length ted Kingdom by a U.S. employer under contract with the
of your stay and the nature of your job are only two of the U.S. Armed Forces. You aren’t subject to the North Atlan-
factors to be considered in determining whether you meet tic Treaty Status of Forces Agreement. You may be a bona
the bona fide residence test. fide resident of the United Kingdom.

Bona fide residence. To meet the bona fide residence Example 2. You are a U.S. citizen in the United King-
test, you must have established a bona fide residence in a dom who qualifies as an “employee” of an armed service
foreign country. or as a member of a “civilian component” under the North
Your bona fide residence isn’t necessarily the same as Atlantic Treaty Status of Forces Agreement. You aren’t a
your domicile. Your domicile is your permanent home, the bona fide resident of the United Kingdom.
place to which you always return or intend to return.
Example 3. You are a U.S. citizen employed in Japan
Example. You could have your domicile in Cleveland, by a U.S. employer under contract with the U.S. Armed
Ohio, and a bona fide residence in Edinburgh, Scotland, if Forces. You are subject to the agreement of the Treaty of
you intend to return eventually to Cleveland. Mutual Cooperation and Security between the United
The fact that you go to Scotland does not automatically States and Japan. Being subject to the agreement doesn’t
make Scotland your bona fide residence. If you go there make you a bona fide resident of Japan.
as a tourist, or on a short business trip, and return to the
Example 4. You are a U.S. citizen employed as an “of-
United States, you haven’t established bona fide resi-
ficial” by the United Nations in Switzerland. You are ex-
dence in Scotland. But if you go to Scotland to work for an
empt from Swiss taxation on the salary or wages paid to
indefinite or extended period and you set up permanent
you by the United Nations. This doesn’t prevent you from
quarters there for yourself and your family, you have prob-
being a bona fide resident of Switzerland.
ably established a bona fide residence in a foreign

18 Chapter 4 Foreign Earned Income and Housing: Publication 54 (2023)

Exclusion – Deduction
Effect of voting by absentee ballot. If you are a U.S. foreign country from March 1, 2021, through the end of
citizen living abroad, you can vote by absentee ballot in 2021 and from January 1, 2023, through September 14,
any election held in the United States without risking your 2023.
status as a bona fide resident of a foreign country.
Reassignment. If you are assigned from one foreign
However, if you give information to the local election of-
post to another, you may or may not have a break in for-
ficials about the nature and length of your stay abroad that
eign residence between your assignments, depending on
does not match the information you give for the bona fide
the circumstances.
residence test, the information given in connection with
absentee voting will be considered in determining your Example 1. You were a resident of Pakistan from Oc-
status, but won’t necessarily be conclusive. tober 1, 2022, through November 30, 2023. On December
1, 2023, you and your family returned to the United States
Uninterrupted period including entire tax year. To
to wait for an assignment to another foreign country. Your
meet the bona fide residence test, you must reside in a
household goods were also returned to the United States.
foreign country or countries for an uninterrupted period
Your foreign residence ended on November 30, 2023,
that includes an entire tax year. An entire tax year is from
and did not begin again until after you were assigned to
January 1 through December 31 for taxpayers who file
another foreign country and physically entered that coun-
their income tax returns on a calendar-year basis.
try. Since you weren’t a bona fide resident of a foreign
During the period of bona fide residence in a foreign
country for the entire tax year of 2022 or 2023, you don’t
country, you can leave the country for brief or temporary
meet the bona fide residence test in either year. You may,
trips back to the United States or elsewhere for vacation or
however, qualify for the foreign earned income exclusion
business. To keep your status as a bona fide resident of a
or the housing exclusion or deduction discussed under
foreign country, you must have a clear intention of return-
Physical Presence Test, later.
ing from such trips, without unreasonable delay, to your
foreign residence or to a new bona fide residence in an- Example 2. Assume the same facts as in Example 1,
other foreign country. except that upon completion of your assignment in Paki-
stan you were given a new assignment to Turkey. On De-
Example 1. You arrived with your family in Lisbon, Por-
cember 1, 2023, you and your family returned to the Uni-
tugal, on November 1, 2022. Your assignment is indefinite,
ted States for a month's vacation. On January 2, 2024,
and you intend to live there with your family until your com-
you arrived in Turkey for your new assignment. Because
pany sends you to a new post. You immediately estab-
you didn’t interrupt your bona fide residence abroad, you
lished residence there. You spent April of 2023 at a busi-
meet the bona fide residence test.
ness conference in the United States. Your family stayed
in Lisbon. Immediately following the conference, you re-
turned to Lisbon and continued living there. On January 1, Physical Presence Test
2024, you completed an uninterrupted period of residence
for a full tax year (2023), and you meet the bona fide resi- You meet the physical presence test if you are physically
dence test. present in a foreign country or countries for 330 full days
during a period of 12 consecutive months. The 330 days
Example 2. Assume the same facts as in Example 1, don’t have to be consecutive. Any U.S. citizen or resident
except that you transferred back to the United States on alien can use the physical presence test to qualify for the
December 13, 2023. You would not meet the bona fide exclusions and the deduction.
residence test because your bona fide residence in the The physical presence test is based only on how long
foreign country, although it lasted more than a year, didn’t you stay in a foreign country or countries. This test doesn’t
include a full tax year. You may, however, qualify for the depend on the kind of residence you establish, your inten-
foreign earned income exclusion or the housing exclusion tions about returning, or the nature and purpose of your
or deduction under the physical presence test (discussed stay abroad.
later).
330 full days. Generally, to meet the physical presence
Bona fide resident for part of a year. Once you have test, you must be physically present in a foreign country or
established bona fide residence in a foreign country for an countries for at least 330 full days during a 12-month pe-
uninterrupted period that includes an entire tax year, you riod. You can count days you spent abroad for any reason.
are a bona fide resident of that country for the period start- You don’t have to be in a foreign country only for employ-
ing with the date you actually began the residence and ment purposes. You can be on vacation.
ending with the date you abandon the foreign residence. You don’t meet the physical presence test if illness,
Your period of bona fide residence can include an entire family problems, a vacation, or your employer's orders
tax year plus parts of 2 other tax years. cause you to be present for less than the required amount
Example. You were a bona fide resident of Singapore of time.
from March 1, 2021, through September 14, 2023. On Exception. You can be physically present in a foreign
September 15, 2023, you returned to the United States. country or countries for less than 330 full days and still
Since you were a bona fide resident of a foreign country meet the physical presence test if you are required to
for all of 2022, you were also a bona fide resident of a

Publication 54 (2023) Chapter 4 Foreign Earned Income and Housing: 19

Exclusion – Deduction
Figure 4-B. How To Figure Overlapping 12-Month Periods
This figure illustrates Example 2 under How to figure the 12-month period.
First Full 12-Month Period

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug
’22 ’22 ’22 ’22 ’22 ’22 ’22 ’22 ’22 ’22 ’22 ’22 ’23 ’23 ’23 ’23 ’23 ’23 ’23 ’23
* *

* 28-day vacation in the United States Second Full 12-Month Period

leave a country because of war or civil unrest. See Waiver during the transit. You are treated as traveling over areas
of Time Requirements, later. not within any foreign country.

Full day. A full day is a period of 24 consecutive hours, How to figure the 12-month period. There are four
beginning at midnight. rules you should know when figuring the 12-month period.

Travel. When you leave the United States to go directly to • Your 12-month period can begin with any day of the
a foreign country or when you return directly to the United month. It ends the day before the same calendar day,
States from a foreign country, the time you spend on or 12 months later.
over international waters doesn’t count toward the • Your 12-month period must be made up of consecu-
330-day total. tive months. Any 12-month period can be used if the
330 days in a foreign country fall within that period.
Example. You leave the United States for France by air
on June 10. You arrive in France at 9:00 a.m. on June 11. • You don’t have to begin your 12-month period with
Your first full day of physical presence in France is June your first full day in a foreign country or end it with the
12. day you leave. You can choose the 12-month period
that gives you the greatest exclusion.
Passing over foreign country. If, in traveling from the
United States to a foreign country, you pass over a foreign • In determining whether the 12-month period falls
country before midnight of the day you leave, the first day within a longer stay in the foreign country, 12-month
you can count toward the 330-day total is the day following periods can overlap one another.
the day you leave the United States. Example 1. You are a construction worker who works
Example. You leave the United States by air at 9:30 on and off in a foreign country over a 20-month period.
a.m. on June 10 to travel to Kenya. You pass over western You might pick up the 330 full days in a 12-month period
Africa at 11:00 p.m. on June 10 and arrive in Kenya at only during the middle months of the time you work in the
12:30 a.m. on June 11. Your first full day in a foreign coun- foreign country because the first few and last few months
try is June 11. of the 20-month period are broken up by long visits to the
United States.
Change of location. You can move about from one
place to another in a foreign country or to another foreign Example 2. You work in New Zealand for a 20-month
country without losing full days. If any part of your travel is period from January 1, 2022, through August 31, 2023,
not within any foreign country and takes less than 24 except that you spend 28 days in February 2022 and 28
hours, you are considered to be in a foreign country during days in February 2023 on vacation in the United States.
that part of travel. You are present in New Zealand for at least 330 full days
during each of the following two 12-month periods: Janu-
Example 1. You leave Ireland by air at 11:00 p.m. on ary 1, 2022–December 31, 2022, and September 1,
July 6 and arrive in Sweden at 3:00 a.m. on July 7. Your 2022–August 31, 2023. By overlapping the 12-month peri-
trip takes less than 24 hours and you lose no full days. ods in this way, you meet the physical presence test for
the whole 20-month period. See Figure 4-B.
Example 2. You leave Norway by ship at 10:00 p.m. on
July 6 and arrive in Portugal at 6:00 a.m. on July 8. Since
your travel isn’t within a foreign country or countries and
Waiver of Time Requirements
the trip takes more than 24 hours, you lose as full days Both the bona fide residence test and the physical pres-
July 6, 7, and 8. If you remain in Portugal, your next full ence test contain minimum time requirements. The mini-
day in a foreign country is July 9. mum time requirements can be waived, however, if you
In United States while in transit. If you are in transit must leave a foreign country because of war, civil unrest,
between two points outside the United States and are or similar adverse conditions in that country. You must be
physically present in the United States for less than 24 able to show that you could have reasonably expected to
hours, you aren’t treated as present in the United States meet the minimum time requirements if not for the adverse
conditions. To qualify for the waiver, you must actually
have your tax home in the foreign country and be a bona

20 Chapter 4 Foreign Earned Income and Housing: Publication 54 (2023)

Exclusion – Deduction
fide resident of, or be physically present in, the foreign • Pension or annuity payments you receive, including
country on or before the beginning date of the waiver. social security benefits (see Pensions and annuities,
later).
Early in 2024, the IRS will publish in the Internal Reve-
nue Bulletin a list of the only countries that qualify for the • Pay you receive as an employee of the U.S. Govern-
waiver for 2023 and the effective dates. If you left one of ment. (See U.S. Government Employees, later.)
the countries on or after the date listed for each country,
• Amounts you include in your income because of your
you can meet the bona fide residence test or physical employer's contributions to a nonexempt employee
presence test for 2023 without meeting the minimum time trust or to a nonqualified annuity contract.
requirement. However, in figuring your exclusion, the num-
ber of your qualifying days of bona fide residence or physi- • Payments you receive after the end of the tax year fol-
cal presence includes only days of actual residence or lowing the tax year in which you performed the serv-
presence within the country. ices that earned the income.

Earned income. This is pay for personal services per-

U.S. Travel Restrictions formed, such as wages, salaries, or professional fees. The
list that follows classifies many types of income into three
If you are present in a foreign country in violation of U.S.
categories. The column headed Variable Income lists in-
law, you will not be treated as a bona fide resident of a for-
come that may fall into either the earned income category,
eign country or as physically present in a foreign country
the unearned income category, or partly into both. For
while you are in violation of the law. Income that you earn
more information on earned and unearned income, see
from sources within such a country for services performed
Earned and Unearned Income, later.
during a period of violation does not qualify as foreign
earned income. Your housing expenses within that country
(or outside that country for housing your spouse or de- Earned Income Unearned Income Variable Income
pendents) while you are in violation of the law cannot be Salaries and wages Dividends Business profits
included in figuring your foreign housing amount. Commissions Interest Royalties
At the time this publication was released, the only coun- Bonuses Capital gains Rents
try to which travel restrictions applied during 2023 was Professional fees Gambling winnings Scholarships and
Cuba. However, individuals working at the U.S. Naval fellowships
Base at Guantanamo Bay in Cuba are not in violation of Tips Alimony
U.S. law. Personal service income earned by individuals at Social security benefits
the base is eligible for the foreign earned income exclu- Pensions
sion, provided the other requirements are met. Annuities
For current information about travel restrictions go
to Travel.state.gov/content/travel/en/international- In addition to the types of earned income listed, certain
travel.html. noncash income and allowances or reimbursements are
considered earned income.

Foreign Earned Income Noncash income. The fair market value of property or fa-
cilities provided to you by your employer in the form of
To claim the foreign earned income exclusion, the foreign lodging, meals, or use of a car is earned income.
housing exclusion, or the foreign housing deduction, you
must have foreign earned income. Allowances or reimbursements. Earned income in-
cludes allowances or reimbursements you receive, such
Foreign earned income is generally income you receive as the following amounts.
for services you perform during a period in which you
meet both of the following requirements. • Cost-of-living allowances.

• Your tax home is in a foreign country. • Overseas differential.

• You meet either the bona fide residence test or the • Family allowance.
physical presence test. • Reimbursement for education or education allowance.
To determine whether your tax home is in a foreign coun- • Home leave allowance.
try, see Tax Home in Foreign Country, earlier. To deter-
mine whether you meet either the bona fide residence test • Quarters allowance.
or the physical presence test, see Bona Fide Residence • Reimbursement for moving or moving allowance (un-
Test and Physical Presence Test, earlier. less excluded from income as discussed later in Reim-
Foreign earned income does not include the following bursement of employee expenses under Earned and
amounts. Unearned Income).

• The value of meals and lodging that you exclude from

your income because the meals and lodging were
furnished for the convenience of your employer.

Publication 54 (2023) Chapter 4 Foreign Earned Income and Housing: 21

Exclusion – Deduction
Source of Earned Income Cameroon that is engaged solely in selling merchandise
outside the United States. You perform no services for the
The source of your earned income is the place where you partnership. At the end of the tax year, your share of the
perform the services for which you received the income. net profits is $80,000. The entire $80,000 is unearned in-
Foreign earned income is income you receive for working come.
in a foreign country. Where or how you are paid has no ef-
fect on the source of the income. For example, income you Example 2. Assume that in Example 1 you spend time
receive for work done in Austria is income from a foreign operating the business. Your share of the net profits is
source even if the income is paid directly to your bank ac- $80,000; 30% of your share of the profits is $24,000. If the
count in the United States and your employer is located in value of your services for the year is $15,000, your earned
New York City. income is limited to the value of your services, $15,000.
Capital not a factor. If capital is not an income-pro-
Example. You are a U.S. citizen, a bona fide resident ducing factor and personal services produce the business
of Canada, and working as a mining engineer. Your salary income, the 30% rule does not apply. The entire amount of
is $76,800 per year. You also receive a $6,000 cost-of-liv- business income is earned income.
ing allowance, and a $6,000 education allowance. Your
employment contract did not indicate that you were enti- Example. You and Lou Green are management con-
tled to these allowances only while outside the United sultants and operate as equal partners in performing serv-
States. Your total income is $88,800. You work a 5-day ices outside the United States. Because capital is not an
week, Monday through Friday. After subtracting your vaca- income-producing factor, all the income from the partner-
tion, you have a total of 240 workdays in the year. You ship is considered earned income.
worked in the United States during the year for 6 weeks
(30 workdays). The following shows how to figure the part Income from a corporation. The salary you receive
of your income that is for work done in Canada during the from a corporation is earned income only if it represents a
year. reasonable allowance as compensation for work you do
for the corporation. Any amount over what is considered a
Number of days reasonable salary is unearned income.
worked in Canada
during the year (210) Example 1. You are a U.S. citizen and an officer and
Number of days of × Total income ($88,800) = $77,700 stockholder of a corporation in Honduras. You perform no
work during the year work or service of any kind for the corporation. During the
for which payment tax year, you receive a $10,000 “salary” from the corpora-
was made (240)
tion. The $10,000 clearly is not for personal services and
Your foreign source earned income is $77,700. is unearned income.

Example 2. You are a U.S. citizen and work full time as

Earned and Unearned Income secretary-treasurer of your corporation. During the tax
year, you receive $100,000 as salary from the corporation.
Earned income was defined earlier as pay for personal If $80,000 is a reasonable allowance as pay for the work
services performed. Some types of income are not easily you did, then $80,000 is earned income.
identified as earned or unearned income. Some of these
types of income are further explained here. Stock options. You may have earned income if you dis-
posed of stock that you got by exercising a stock option
Income from a sole proprietorship or partnership. In- granted to you under an employee stock purchase plan.
come from a business in which capital investment is an If your gain on the disposition of stock you got by exer-
important part of producing the income may be unearned cising an option is treated as capital gain, your gain is un-
income. If you are a sole proprietor or partner and your earned income.
personal services are also an important part of producing However, if you disposed of the stock less than 2 years
the income, the part of the income that represents the after you were granted the option or less than 1 year after
value of your personal services will be treated as earned you got the stock, part of the gain on the disposition may
income. be earned income. It is considered received in the year
Capital a factor. If capital investment is an important you disposed of the stock and earned in the year you per-
part of producing income, no more than 30% of your share formed the services for which you were granted the op-
of the net profits of the business is earned income. tion. Any part of the earned income that is due to work you
If you have no net profits, the part of your gross profit did outside the United States is foreign earned income.
that represents a reasonable allowance for personal serv- See Pub. 525, Taxable and Nontaxable Income, for a
ices actually performed is considered earned income. Be- discussion of the treatment of stock options.
cause you do not have a net profit, the 30% limit does not
apply. Pensions and annuities. For purposes of the foreign
earned income exclusion, the foreign housing exclusion,
Example 1. You are a U.S. citizen and meet the bona and the foreign housing deduction, amounts received as
fide residence test. You invest in a partnership based in pensions or annuities are unearned income.

22 Chapter 4 Foreign Earned Income and Housing: Publication 54 (2023)

Exclusion – Deduction
Royalties. Royalties from the leasing of oil and mineral Reimbursement of employee expenses. If you are re-
lands and patents are generally a form of rent or dividends imbursed under an accountable plan (defined later) for ex-
and are unearned income. penses you incur on your employer's behalf and you have
Royalties received by a writer are earned income if they adequately accounted to your employer for the expenses,
are received: do not include the reimbursement for those expenses in
your earned income.
• For the transfer of property rights of the writer in the
The expenses for which you are reimbursed are not
writer's product, or
considered allocable (related) to your earned income. If
• Under a contract to write a book or series of articles. expenses and reimbursement are equal, there is nothing
to allocate to excluded income. If expenses are more than
Rental income. Generally, rental income is unearned in- the reimbursement, the unreimbursed expenses are con-
come. If you perform personal services in connection with sidered to have been incurred in producing earned in-
the production of rent, up to 30% of your net rental income come and must be divided between your excluded and in-
can be considered earned income. cluded income. (See chapter 5.) If the reimbursement is
more than the expenses, no expenses remain to be divi-
Example. Larry Smith, a U.S. citizen living in Australia,
ded between excluded and included income and the ex-
owns and operates a rooming house in Sydney. If he is op-
cess reimbursement must be included in earned income.
erating the rooming house as a business that requires
These rules do not apply to the following individuals.
capital and personal services, he can consider up to 30%
of net rental income as earned income. On the other hand, • Straight-commission salespersons.
if he just owns the rooming house and performs no per-
• Employees who have arrangements with their employ-
sonal services connected with its operation, except per- ers under which taxes are not withheld on a percent-
haps making minor repairs and collecting rents, none of age of the commissions because the employers con-
his net income from the house is considered earned in- sider that percentage to be attributable to the
come. It is all unearned income. employees' expenses.
Professional fees. If you are engaged in a professional Accountable plan. An accountable plan is a reim-
occupation (such as a doctor or lawyer), all fees received bursement or allowance arrangement that includes all
in the performance of these services are earned income. three of the following rules.
Income of an artist. Income you receive from the sale of • The expenses covered under the plan must have a
paintings you created is earned income. business connection.

Scholarships and fellowships. Any portion of a schol-

• The employee must adequately account to the em-
ployer for these expenses within a reasonable period
arship or fellowship grant that is paid to you for teaching,
of time.
research, or other services is considered earned income if
you must include it in your gross income. If the payer of • The employee must return any excess reimbursement
the grant is required to provide you with a Form W-2, or allowance within a reasonable period of time.
these amounts will be listed as wages.
Reimbursement of moving expenses. For tax years
Certain scholarship and fellowship income may beginning after 2017, you can no longer deduct moving
TIP be exempt under other provisions. For more infor- expenses. If you received a reimbursement of moving ex-
mation, see Pub. 970. penses, please note that, in most cases, reimbursement
of moving expenses will be earned income. This section
Use of employer's property or facilities. If you receive discusses reimbursements that must be included in
fringe benefits in the form of the right to use your employ- earned income.
er's property or facilities, the fair market value of that right The rules for determining when the reimbursement is
is earned income. Fair market value is the price at which considered earned or where the reimbursement is consid-
the property would change hands between a willing buyer ered earned may differ somewhat from the general rules
and a willing seller, neither being required to buy or sell, previously discussed.
and both having reasonable knowledge of all the neces- Although you receive the reimbursement in one tax
sary facts. year, it may be considered earned for services performed,
or to be performed, in another tax year. You must report
Example. You are privately employed and live in Japan the reimbursement as income on your return in the year
all year. You are paid a salary of $6,000 a month. You live you receive it, even if it is considered earned during a dif-
rent-free in a house provided by your employer that has a ferent year.
fair rental value of $3,000 a month. The house is not provi-
ded for your employer's convenience. You report on the Moving expenses are only deductible for mem-
calendar-year, cash basis. You received $72,000 salary ! bers of the U.S. Armed Forces who move pur-
CAUTION suant to a military order and incident to a perma-
from foreign sources plus $36,000 fair rental value of the
house, or a total of $108,000 of earned income. nent change of station. Therefore, the exclusion from
earned income for qualified moving expenses is, gener-
ally, only available to members of the U.S. Armed Forces.

Publication 54 (2023) Chapter 4 Foreign Earned Income and Housing: 23

Exclusion – Deduction
 Move from United States to foreign country. If you to the United States regardless of whether you continue to
move from the United States to a foreign country, your work for the employer, the includible reimbursement is
moving expense reimbursement is generally considered considered compensation for past services performed in
pay for future services to be performed at the new loca- the foreign country. The includible reimbursement is con-
tion. The reimbursement is considered earned solely in sidered earned in the year of the move if you qualify for the
the year of the move if you qualify for the exclusion for a foreign earned income exclusion for a period that includes
period that includes at least 120 days during that tax year. at least 120 days during that year. Otherwise, you treat the
If you are neither a bona fide resident of nor physically includible reimbursement as received for services per-
present in a foreign country or countries for a period that formed in the foreign country in the year of the move and
includes 120 days during the year of the move, a portion the year immediately before the year of the move.
of the reimbursement is considered earned in the year of See the discussion under Move from United States to
the move and a portion is considered earned in the year foreign country, earlier, to figure the amount of the includi-
following the year of the move. To figure the amount ble reimbursement considered earned in the year of the
earned in the year of the move, multiply the reimburse- move. The amount earned in the year before the year of
ment by a fraction. The numerator (top number) is the the move is the difference between the total includible re-
number of days in your qualifying period that fall within the imbursement and the amount earned in the year of the
year of the move, and the denominator (bottom number) is move.
the total number of days in the year of the move.
The difference between the total reimbursement and Example. You are a U.S. citizen employed in a foreign
the amount considered earned in the year of the move is country. You retired from employment with your employer
the amount considered earned in the year following the on March 31, 2023, and returned to the United States on
year of the move. The part earned in each year is figured the same day, after having been a bona fide resident of
as shown in the following example. the foreign country for several years. A written agreement
with your employer entered into before you went abroad
Example. You are a U.S. citizen working in the United provided that you would be reimbursed for your move
States. You were told in October 2022 that you were being back to the United States.
transferred to a foreign country. You arrived in the foreign In April 2023, your former employer reimbursed you
country on December 15, 2022, and you are a bona fide $4,000 for the cost of your move back to the United
resident for the remainder of 2022 and all of 2023. Your States. Because you were not a bona fide resident of a
employer reimbursed you $2,000 in January 2023 for your foreign country or countries for a period that included at
moving expense. Because you did not qualify for the ex- least 120 days in 2023 (the year of the move), the includi-
clusion under the bona fide residence test for at least 120 ble reimbursement is considered pay for services per-
days in 2022 (the year of the move), the reimbursement is formed in the foreign country for both 2023 and 2022.
considered pay for services performed in the foreign You figure the part of the moving expense reimburse-
country for both 2022 and 2023. ment for services performed in the foreign country for
You figure the part of the reimbursement for services 2023 by multiplying the total includible reimbursement by
performed in the foreign country in 2022 by multiplying the a fraction. The fraction is the number of days of foreign
total reimbursement by a fraction. The fraction is the num- residence during the year (90) (January 1 to March 31,
ber of days during which you were a bona fide resident in 2023, equals 90 days) divided by the number of days in
2022 (the year of the move) divided by 365. The remaining the year (365). The remaining part of the includible reim-
part of the reimbursement is for services performed in the bursement is for services performed in the foreign country
foreign country in 2023. in 2022. You report the amount of the includible reim-
This computation is used only to determine when the bursement in 2023, the year you received it.
reimbursement is considered earned. You would include In this example, if you met the physical presence
the amount of the reimbursement in income in 2023, the
TIP test for a period that included at least 120 days in
year you received it. 2023, the moving expense reimbursement would
Move between foreign countries. If you move be- be considered earned entirely in the year of the move.
tween foreign countries, any moving expense reimburse-
ment that you must include in income will be considered Storage expense reimbursements. If you are reim-
earned in the year of the move if you qualify for the foreign bursed for storage expenses, the reimbursement is for
earned income exclusion for a period that includes at least services you perform during the period of time for which
120 days in the year of the move. the storage expenses are incurred.
Move to United States. If you move to the United
States, the moving expense reimbursement that you must
U.S. Government Employees
include in income is generally considered to be U.S.
For purposes of the foreign earned income exclusion, the
source income.
foreign housing exclusion, and the foreign housing deduc-
However, if under either an agreement between you
tion, foreign earned income does not include any amounts
and your employer or a statement of company policy that
paid by the United States or any of its agencies to its em-
is reduced to writing before your move to the foreign coun-
ployees. This includes amounts paid from both appropri-
try, your employer will reimburse you for your move back
ated and nonappropriated funds.

24 Chapter 4 Foreign Earned Income and Housing: Publication 54 (2023)

Exclusion – Deduction
 The following organizations (and other organizations If these conditions are met, don’t include the value of
similarly organized and operated under U.S. Army, Navy, the meals or lodging in your income, even if a law or your
or Air Force regulations) are integral parts of the Armed employment contract says that they are provided as com-
Forces, agencies, or instrumentalities of the United States. pensation.
• U.S. Armed Forces exchanges. Amounts you don’t include in income because of these
• Commissioned and noncommissioned officers' mes- rules aren’t foreign earned income.
ses.
If you receive a Form W-2, excludable amounts
• Armed Forces motion picture services. shouldn’t be included in the total reported in box 1 as wa-
• Kindergartens on foreign Armed Forces installations. ges.

Family. Your family, for this purpose, includes only your

Amounts paid by the United States or its agencies to
spouse and your dependents.
persons who aren’t their employees may qualify for exclu-
sion or deduction. Lodging. The value of lodging includes the cost of heat,
electricity, gas, water, sewer service, and similar items
If you are a U.S. Government employee paid by a U.S. needed to make the lodging fit to live in.
agency that assigned you to a foreign government to per-
form specific services for which the agency is reimbursed Business premises of employer. Generally, the busi-
by the foreign government, your pay is from the U.S. Gov- ness premises of your employer is wherever you work. For
ernment and doesn’t qualify for exclusion or deduction. example, if you work as a housekeeper, meals and lodging
provided in your employer's home are provided on the
If you have questions about whether you are an em- business premises of your employer. Similarly, meals pro-
ployee or an independent contractor, get Pub. 15-A. vided to cowhands while herding cattle on land leased or
owned by their employer are considered provided on the
American Institute in Taiwan. Amounts paid by the premises of their employer.
American Institute in Taiwan aren’t foreign earned income
for purposes of the foreign earned income exclusion, the Convenience of employer. Whether meals or lodging
foreign housing exclusion, or the foreign housing deduc- are provided for your employer's convenience must be de-
tion. If you are an employee of the American Institute in termined from all the facts and circumstances. Meals fur-
Taiwan, allowances you receive are exempt from U.S. tax nished at no charge are considered provided for your em-
up to the amount that equals tax-exempt allowances re- ployer's convenience if there is a good business reason
ceived by civilian employees of the U.S. Government. for providing them, other than to give you more pay.
On the other hand, if your employer provides meals to
Allowances. Cost-of-living and foreign-area allowances you or your family as a means of giving you more pay, and
paid under certain acts of Congress to U.S. civilian offi- there is no other business reason for providing them, their
cers and employees stationed in Alaska and Hawaii or value is extra income to you because they aren’t furnished
elsewhere outside the 48 contiguous states and the Dis- for the convenience of your employer.
trict of Columbia can be excluded from gross income. Post
differentials are wages that must be included in gross in- Condition of employment. Lodging is provided as a
come, regardless of the act of Congress under which they condition of employment if you must accept the lodging to
are paid. properly carry out the duties of your job. You must accept
lodging to properly carry out your duties if, for example,
More information. Pub. 516 has more information for you must be available for duty at all times or you could not
U.S. Government employees abroad. perform your duties if the lodging wasn’t furnished.

Exclusion of Meals and Lodging Foreign camps. If the lodging is in a camp located in a
foreign country, the camp is considered part of your em-
You don’t include in your income the value of meals and ployer's business premises. The camp must be:
lodging provided to you and your family by your employer • Provided for your employer's convenience because
at no charge if the following conditions are met. the place where you work is in a remote area where
1. The meals are furnished: satisfactory housing isn’t available to you on the open
market within a reasonable commuting distance,
a. On the business premises of your employer, and
• Located as close as reasonably possible in the area
b. For the convenience of your employer. where you work, and
2. The lodging is furnished: • Provided in a common area or enclave that isn’t avail-
able to the general public for lodging or accommoda-
a. On the business premises of your employer,
tions and that normally houses at least 10 employees.
b. For the convenience of your employer, and
c. As a condition of your employment.

Publication 54 (2023) Chapter 4 Foreign Earned Income and Housing: 25

Exclusion – Deduction
 In 2023, you were paid $124,300 for your work in Brazil.
Foreign Earned Income $23,800 was for work you did in 2022 and $100,500 was
for work you did in 2023. You can exclude $20,800 of the
Exclusion $23,800 from your income in 2023. This is the $108,700
maximum exclusion in 2022 minus the $87,900 actually
excluded that year. You must include the remaining $3,000
If your tax home is in a foreign country and you meet the
in income in 2023 because you could not have excluded
bona fide residence test or the physical presence test, you
that income in 2022 if you had received it that year. You
can choose to exclude from your income a limited amount
can exclude all of the $100,500 you were paid for work
of your foreign earned income. Foreign earned income
you did in 2023 from your 2023 income.
was defined earlier in this chapter.
Your total foreign earned income exclusion for 2023 is
You can also choose to exclude from your income a for- $121,300 ($20,800 for work you did in 2022 and $100,500
eign housing amount. This is explained later under For- for work you did in 2022). You would include in your 2023
eign Housing Exclusion. If you choose to exclude a foreign income $3,000 for the work you did in 2022.
housing amount, you must figure the foreign housing ex-
clusion before you figure the foreign earned income exclu- Year-end payroll period. There is an exception to the
sion. Your foreign earned income exclusion is limited to general rule that income is considered earned in the year
your foreign earned income minus your foreign housing you do the work for which you receive the income. If you
exclusion. are a cash-basis taxpayer, any salary or wage payment
you receive after the end of the year in which you do the
If you choose to exclude foreign earned income, you
work for which you receive the pay is considered earned
cannot deduct, exclude, or claim a credit for any item that
entirely in the year you receive it if all four of the following
can be allocated to or charged against the excluded
apply.
amounts. This includes any expenses, losses, and other
normally deductible items allocable to the excluded in- • The period for which the payment is made is a normal
come. For more information about deductions and credits, payroll period of your employer that regularly applies
see chapter 5. to you.
• The payroll period includes the last day of your tax
Limit on Excludable Amount year (December 31 if you figure your taxes on a calen-
dar-year basis).
You may be able to exclude up to $120,000 of your foreign
earned income in 2023. • The payroll period is not longer than 16 days.
You cannot exclude more than the smaller of: • The payday comes at the same time in relation to the
payroll period that it would normally come and it
• $120,000, or comes before the end of the next payroll period.
• Your foreign earned income (discussed earlier) for the
tax year minus your foreign housing exclusion (dis- Example. You are paid twice a month. For the normal
cussed later). payroll period that begins on the 1st of the month and
ends on the 15th of the month, you are paid on the 16th
If both you and your spouse work abroad and each of day of the month. For the normal payroll period that begins
you meets either the bona fide residence test or the physi- on the 16th of the month and ends on the last day of the
cal presence test, you can each choose the foreign month, you are paid on the 1st day of the following month.
earned income exclusion. You both don’t need to meet the Because all of the above conditions are met, the pay you
same test. Together, you and your spouse can exclude as received on January 1, 2023, is considered earned in
much as $240,000. 2023.
Paid in year following work. Generally, you are consid- Income earned over more than 1 year. Regardless of
ered to have earned income in the year in which you do when you actually receive income, you must apply it to the
the work for which you receive the income, even if you year in which you earned it in figuring your excludable
work in one year but are not paid until the following year. If amount for that year. For example, a bonus may be based
you report your income on a cash basis, you report the in- on work you did over several years. You determine the
come on your return for the year you receive it. If you work amount of the bonus that is considered earned in a partic-
one year, but are not paid for that work until the next year, ular year in two steps.
the amount you can exclude in the year you are paid is the
amount you could have excluded in the year you did the 1. Divide the bonus by the number of calendar months in
work if you had been paid in that year. For an exception to the period when you did the work that resulted in the
this general rule, see Year-end payroll period, later. bonus.
2. Multiply the result of (1) by the number of months you
Example. You were a bona fide resident of Brazil for
did the work during the year. This is the amount that is
all of 2022 and 2023. You report your income on the cash
subject to the exclusion limit for that tax year.
basis. In 2021, you were paid $87,900 for work you did in
Brazil during that year. You excluded all of the $87,900
from your income in 2022.

26 Chapter 4 Foreign Earned Income and Housing: Publication 54 (2023)

Exclusion – Deduction
Income received more than 1 year after it was Example. You are physically present and have your
earned. You can’t exclude income you receive after the tax home in a foreign country for a 16-month period from
end of the year following the year you do the work to earn June 1, 2022, through September 30, 2023, except for 16
it. days in December 2022 when you were on vacation in the
United States. You figure the maximum exclusion for 2022
Example. You were a bona fide resident of Sweden
as follows.
for 2021, 2022, and 2023. You report your income on the
cash basis. In 2021, you were paid $69,000 for work you 1. Beginning with June 1, 2022, count forward 330 full
did in Sweden that year, and in 2022, you were paid days. Do not count the 16 days you spent in the Uni-
$74,000 for that year's work in Sweden. You excluded all ted States. The 330th day, May 12, 2023, is the last
the income on your 2021 and 2022 returns. day of a 12-month period.
In 2023, you were paid $92,000; $82,000 for your work
2. Count backward 12 months from May 12, 2023, to
in Sweden during 2023, and $10,000 for work you did in
find the first day of this 12-month period, May 13,
Sweden in 2021. You cannot exclude any of the $10,000
2022. This 12-month period runs from May 13, 2022,
for work done in 2021 because you received it after the
through May 12, 2023.
end of the year following the year in which you earned it.
You must include the $10,000 in income. You can exclude 3. Count the total days during 2022 that fall within this
all of the $82,000 received for work you did in 2023. 12-month period. This is 233 days (May 13, 2022–De-
cember 31, 2022).
Community income. The maximum exclusion applies
separately to the earnings of spouses. Ignore any com- 4. Multiply $108,700 (the maximum exclusion for 2022)
munity property laws when you figure your limit on the for- by the fraction 233/365 to find your maximum exclu-
eign earned income exclusion. sion for 2022 ($69,389).
You figure the maximum exclusion for 2023 in the oppo-
Part-year exclusion. If the period for which you qualify
site manner.
for the foreign earned income exclusion includes only part
of the year, you must adjust the maximum limit based on 1. Beginning with your last full day, September 30, 2022,
the number of qualifying days in the year. The number of count backward 330 full days. Do not count the 16
qualifying days is the number of days in the year within the days you spent in the United States. That day, Octo-
period on which you both: ber 19, 2022, is the first day of a 12-month period.
• Have your tax home in a foreign country, and 2. Count forward 12 months from October 19, 2022, to
• Meet either the bona fide residence test or the physi- find the last day of this 12-month period, October 18,
cal presence test. 2023. This 12-month period runs from October 19,
2022, through October 18, 2023.
For this purpose, you can count as qualifying days all
days within a period of 12 consecutive months once you 3. Count the total days during 2023 that fall within this
are physically present and have your tax home in a foreign 12-month period. This is 291 days (January 1, 2023 –
country for 330 full days. To figure your maximum exclu- October 18, 2023).
sion, multiply the maximum excludable amount for the 4. Multiply $120,000, the maximum limit, by the fraction
year by the number of your qualifying days in the year, and 291/365 to find your maximum exclusion for 2022
then divide the result by the number of days in the year. ($95,671).
Example. You report your income on the calen-
dar-year basis and you qualified for the foreign earned in-
come exclusion under the bona fide residence test for 75 Choosing the Exclusion
days in 2023. You can exclude a maximum of 75/365 of
$120,000, or $24,658 of your foreign earned income for The foreign earned income exclusion is voluntary. You can
2023. If you qualify under the bona fide residence test for choose the exclusion by completing the appropriate parts
all of 2024, you can exclude your foreign earned income of Form 2555.
up to the 2024 limit.
Physical presence test. Under the physical presence When You Can Choose the Exclusion
test, a 12-month period can be any period of 12 consecu-
tive months that includes 330 full days. If you qualify for Your initial choice of the exclusion on Form 2555 must
the foreign earned income exclusion under the physical generally be made with one of the following returns.
presence test for part of a year, it is important to carefully • A return filed by the due date (including any exten-
choose the 12-month period that will allow the maximum sions).
exclusion for that year.
• A return amending a timely filed return. Amended re-
Note. See How to figure the 12-month period under turns must generally be filed by the later of 3 years af-
Physical Presence Test, earlier, for the rules on figuring ter the filing date of the original return or 2 years after
the 12-month period. the tax is paid.

Publication 54 (2023) Chapter 4 Foreign Earned Income and Housing: 27

Exclusion – Deduction
 • A return filed within 1 year from the original due date of Revoking the Exclusion
the return (determined without regard to any exten-
sions). You can revoke your choice for any year. You do this by at-
taching a statement that you are revoking one or more
Filing after the above periods. You can choose the ex- previously made choices to the return or amended return
clusion on a return filed after the periods described above for the first year that you do not wish to claim the exclu-
if you owe no federal income tax after taking into account sion(s). You must specify which choice(s) you are revok-
the exclusion. If you owe federal income tax after taking ing. You must revoke separately a choice to exclude for-
into account the exclusion, you can choose the exclusion eign earned income and a choice to exclude foreign
on a return filed after the periods described earlier if you housing amounts.
file before the IRS discovers that you failed to choose the
exclusion. Whether or not you owe federal income tax af- If you revoked a choice and within 5 years again wish to
ter taking the exclusion into account, if you file your return choose the same exclusion, you must apply for IRS appro-
after the periods described earlier, you must type or legi- val. You do this by requesting a ruling from the IRS.
bly print at the top of the first page of the Form 1040 or Mail your request for a ruling, in duplicate, to:
1040-SR, “Filed pursuant to section 1.911-7(a)(2)(i)(D).”
Associate Chief Counsel (International)
If you owe federal income tax after taking into account Internal Revenue Service
the foreign earned income exclusion and the IRS discov- Attn: CC:PA:LPD:DRU
ered that you failed to choose the exclusion, you may still P.O. Box 7604
be able to choose the exclusion. You must request a pri- Ben Franklin Station
vate letter ruling under Regulations section 301.9100-3 Washington, DC 20044
and Revenue Procedure 2021-1, 2021-01 I.R.B. 1, availa-
ble at IRS.gov/irb/2021-01_IRB#REV-PROC-2021-1.
In deciding whether to give approval, the IRS will consider
Effect of Choosing the Exclusion any facts and circumstances that may be relevant. These
may include a period of residence in the United States, a
Once you choose to exclude your foreign earned income, move from one foreign country to another foreign country
that choice remains in effect for that year and all later with different tax rates, a substantial change in the tax
years unless you revoke it. laws of the foreign country of residence or physical pres-
ence, and a change of employer. For more information go
Foreign tax credit or deduction. Once you choose to
to IRS.gov/Individuals/International-Taxpayers/Revoking-
exclude foreign earned income, you can’t take a foreign
Your-Choice-to-Exclude-Foreign-Earned-Income.
tax credit or deduction for taxes on income you can ex-
clude. If you do take a credit or deduction for any of those If a private delivery service is used, the address
taxes in a later year, your election for the foreign earned is:
income exclusion will be revoked beginning with that year.
See Pub. 514 for more information. Associate Chief Counsel (International)
Internal Revenue Service
Additional child tax credit. You can’t take the additional Attn: CC:PA:LPD:TSS, Room 5336
child tax credit if you claim the foreign earned income ex- 1111 Constitution Ave. NW
clusion. Washington, DC 20224

Earned income credit. If you claim the foreign earned

income exclusion, you don’t qualify for the earned income
credit for the year. For more information on this credit, see
Pub. 596. Foreign Housing Exclusion and
Figuring tax on income not excluded. If you claim the Deduction
foreign earned income exclusion, the housing exclusion
(discussed later), or both, you must figure the tax on your In addition to the foreign earned income exclusion, you
nonexcluded income using the tax rates that would have can also claim an exclusion or a deduction from gross in-
applied had you not claimed the exclusions. See the come for your housing amount if your tax home is in a for-
Instructions for Form 1040 and complete the Foreign eign country and you qualify for the exclusions and deduc-
Earned Income Tax Worksheet to figure the amount of tax tion under either the bona fide residence test or the
to enter on Form 1040 or 1040-SR, line 16. If you must at- physical presence test.
tach Form 6251 to your return, use the Foreign Earned In-
The housing exclusion applies only to amounts consid-
come Tax Worksheet provided in the Instructions for Form
ered paid for with employer-provided amounts. The hous-
6251.
ing deduction applies only to amounts paid for with
self-employment earnings.
If you are married and you and your spouse each quali-
fies under one of the tests, see Married Couples, later.

28 Chapter 4 Foreign Earned Income and Housing: Publication 54 (2023)

Exclusion – Deduction
Housing Amount • The cost of buying property, including principal pay-
ments on a mortgage;
Your housing amount is the total of your housing expenses • The cost of domestic labor (maids, gardeners, etc.);
for the year minus the base housing amount.
• Pay television subscriptions;
Base housing amount. The computation of the base • Improvements and other expenses that increase the
housing amount (line 32 of Form 2555) is tied to the maxi- value or appreciably prolong the life of property;
mum foreign earned income exclusion. The amount is
16% of the exclusion amount (computed on a daily basis), • Purchased furniture or accessories; or
multiplied by the number of days in your qualifying period • Depreciation or amortization of property or improve-
that fall within your tax year. ments.
For 2023, the maximum foreign earned income exclu-
No double benefit. You can’t include in housing
sion is $120,000 per year; 16% of this amount is $19,200,
! expenses the value of meals or lodging that you
or $56.60 per day. To figure your base housing amount if
CAUTION exclude from gross income (see Exclusion of
you are a calendar-year taxpayer, multiply $56.60 by the
Meals and Lodging, earlier).
number of your qualifying days during 2023. (See
Part-year exclusion under Limit on Excludable Amount,
Limit on housing expenses. The amount of qualified
earlier.) Subtract the result from your total housing expen-
housing expenses eligible for the housing exclusion and
ses (up to the applicable limit) to find your housing
housing deduction is limited. The limit is generally 30% of
amount.
the maximum foreign earned income exclusion (computed
Example. Your qualifying period includes all of 2023. on a daily basis), multiplied by the number of days in your
During the year, you spent $19,124 for your housing. This qualifying period that fall within your tax year. For 2023,
is below the limit for the location in which you incurred the this is generally $98.63 per day ($36,000 per year). How-
expenses. Your housing amount is $20,404 minus ever, the limit will vary depending upon the location of your
$19,200, or $1,204. foreign tax home.
A qualified individual incurring housing expenses in a
U.S. Government allowance. You must reduce your high-cost locality during 2023 can use housing expenses
housing amount by any U.S. Government allowance or that total more than the standard limit on housing expen-
similar nontaxable allowance intended to compensate you ses ($36,000) to determine the housing amount. An indi-
or your spouse for the expenses of housing during the pe- vidual who does not incur housing expenses in a high-cost
riod for which you claim a foreign housing exclusion or de- locality is limited to maximum housing expenses of $98.63
duction. per day ($36,000 per year).
The limits for high-cost localities are listed in the
Housing expenses. Housing expenses include your rea- Instructions for Form 2555.
sonable expenses paid or incurred for housing in a foreign
You can elect to apply the 2023 housing cost lim-
country for you and (if they live with you) for your spouse
and dependents. TIP its to figure your 2022 housing exclusion instead
of using the 2022 limits. The IRS and Treasury an-
Consider only housing expenses for the part of the year
ticipate that you will be able to elect to apply the 2024 lim-
that you qualify for the foreign earned income exclusion.
its to figure your 2023 housing exclusion instead of using
Housing expenses include:
the 2023 limits.
• Rent,
• The fair rental value of housing provided in kind by Second foreign household. Ordinarily, if you main-
your employer, tain two foreign households, your reasonable foreign
housing expenses include only costs for the household
• Repairs, that bears the closer relationship (not necessarily geo-
• Utilities (other than telephone charges), graphic) to your tax home. However, if you maintain a sec-
ond, separate household outside the United States for
• Real and personal property insurance, your spouse or dependents because living conditions
• Nondeductible occupancy taxes, near your tax home are dangerous, unhealthful, or other-
wise adverse, include the expenses for the second house-
• Nonrefundable fees for securing a leasehold,
hold in your reasonable foreign housing expenses. You
• Rental of furniture and accessories, and can’t include expenses for more than one second foreign
• Residential parking. household at the same time.
If you maintain two households and you exclude the
Housing expenses do not include: value of one because it is provided by your employer, you
• Expenses that are lavish or extravagant under the cir- can still include the expenses for the second household in
cumstances; figuring a foreign housing exclusion or deduction.
Adverse living conditions include:
• Deductible interest and taxes (including deductible in-
terest and taxes of a tenant-stockholder in a coopera- • A state of warfare or civil insurrection in the general
tive housing corporation); area of your tax home, and

Publication 54 (2023) Chapter 4 Foreign Earned Income and Housing: 29

Exclusion – Deduction
 • Conditions under which it is not feasible to provide clude. If you do take a credit or deduction for any of those
family housing (for example, if you must live on a con- taxes, your choice to exclude housing amounts may be
struction site or drilling rig). considered revoked. See Pub. 514 for more information.

Additional child tax credit. You can’t take the additional

Foreign Housing Exclusion child tax credit if you claim the foreign housing exclusion.
If you do not have self-employment income, all of your Earned income credit. If you claim the foreign housing
earnings are employer-provided amounts and your entire exclusion, you don’t qualify for the earned income credit
housing amount is considered paid for with those em- for the year.
ployer-provided amounts. This means that you can ex-
clude (up to the limits) your entire housing amount.
Foreign Housing Deduction
Employer-provided amounts. These include any
amounts paid to you or paid or incurred on your behalf by If you don’t have self-employment income, you can’t take a
your employer that are taxable foreign earned income foreign housing deduction.
(without regard to the foreign earned income exclusion) to
How you figure your housing deduction depends on
you for the year. Employer-provided amounts include:
whether you have only self-employment income or both
• Your salary, self-employment income and employer-provided income.
• Any reimbursement for housing expenses, In either case, the amount you can deduct is subject to the
limit described later.
• Amounts your employer pays to a third party on your
behalf, Self-employed, no employer-provided amounts. If
• The fair rental value of company-owned housing fur- none of your housing amount is considered paid for with
nished to you unless that value is excluded under the employer-provided amounts, such as when all of your in-
rules explained earlier under Exclusion of Meals and come is from self-employment, you can deduct your hous-
Lodging, ing amount, subject to the limit described later.
Take the deduction by including it on line 24j of Sched-
• Amounts paid to you by your employer as part of a tax ule 1 (Form 1040).
equalization plan, and
• Amounts paid to you or a third party by your employer Self-employed and employer-provided amounts. If
for the education of your dependents. you are both an employee and a self-employed individual
during the year, you can deduct part of your housing
Choosing the exclusion. You can choose the housing amount and exclude part of it. To find the part that you can
exclusion by completing the appropriate parts of Form exclude, multiply your housing amount by the em-
2555. Rules about choosing the exclusion under Foreign ployer-provided amounts (discussed earlier) and then di-
Earned Income Exclusion, earlier, also apply to the foreign vide the result by your foreign earned income. This is the
housing exclusion. amount you can use to figure your foreign housing exclu-
Your housing exclusion is the lesser of: sion. You can deduct the balance of the housing amount,
subject to the limit described later.
• That part of your housing amount paid for with em-
ployer-provided amounts, or Example. Your housing amount for the year is
• Your foreign earned income. $18,000. During the year, your total foreign earned income
is $100,000, of which half ($50,000) is from self-employ-
If you choose the housing exclusion, you must figure it be-
ment and half is from your services as an employee. Half
fore figuring your foreign earned income exclusion. You
of your housing amount ($18,000 ÷ 2) is considered provi-
cannot claim less than the full amount of the housing ex-
ded by your employer. You can exclude $9,000 as a hous-
clusion to which you are entitled.
ing exclusion. You can deduct the remaining $9,000 as a
Figuring tax on income not excluded. If you claim housing deduction subject to the following limit.
the housing exclusion, the foreign earned income exclu-
sion (discussed earlier), or both, you must figure the tax Limit
on your nonexcluded income using the tax rates that
would have applied had you not claimed the exclusions. Your housing deduction cannot be more than your foreign
See the Instructions for Form 1040 and complete the For- earned income minus the total of:
eign Earned Income Tax Worksheet to figure the amount
of tax to enter on Form 1040 or 1040-SR, line 16. If you • Your foreign earned income exclusion, plus
must attach Form 6251 to your return, use the Foreign • Your housing exclusion.
Earned Income Tax Worksheet provided in the Instructions
for Form 6251. Carryover. You can carry over to the next year any part of
your housing deduction that is not allowed because of the
Foreign tax credit or deduction. Once you choose to limit. You are allowed to carry over your excess housing
exclude foreign housing amounts, you can’t take a foreign deduction to the next year only. If you can’t deduct it in the
tax credit or deduction for taxes on income you can ex- next year, you can’t carry it over to any other year. You

30 Chapter 4 Foreign Earned Income and Housing: Publication 54 (2023)

Exclusion – Deduction
deduct the carryover in figuring adjusted gross income. through the end of the year. Jane paid $3,000 for housing
The amount of carryover you can deduct is limited to your expenses in 2023, all of which were incurred during her
foreign earned income for the year of the carryover minus period of residence in Ghana.
the total of your foreign earned income exclusion, housing Tom and Jane figure their housing amount jointly. If Tom
exclusion, and housing deduction for that year. claims the housing exclusion, their housing expenses
would be $13,000 ($10,000 + $3,000) and their base
Additional child tax credit. You can’t take the additional housing amount, using Tom's 2023 period of residence
child tax credit if you claim the foreign housing deduction. (August 17–December 31, 2023), would be $7,754
($56.60 × 137 days). Tom's housing amount would be
Married Couples $5,246 ($13,000 – $7,754). If, instead, Jane claims the
housing exclusion, their housing expenses would be limi-
If both you and your spouse qualify for the foreign housing ted to $10,500 ($7,500 + $3,000) and their base housing
exclusion or the foreign housing deduction, how you figure amount, using Jane's period of residence (September 15–
the benefits depends on whether you maintain separate December 31, 2023), would be $6,113 ($56.60 × 108
households. days). Jane's housing amount would be $4,387 ($10,500
– $6,113).
Separate Households
If you and your spouse live apart and maintain separate Form 2555
households, you both may be able to claim the foreign
housing exclusion or the foreign housing deduction. You Use Form 2555 to claim the foreign earned income exclu-
both can claim the exclusion or the deduction if both of the sion. You must file Form 2555 each year you are claiming
following conditions are met. the exclusion.
• You and your spouse have different tax homes that Also, use Form 2555 to claim either the foreign housing
aren’t within reasonable commuting distance of each
exclusion or the foreign housing deduction. Form 2555
other.
shows how you meet the bona fide residence test or phys-
• Neither spouse's residence is within reasonable com- ical presence test, how much of your earned income is ex-
muting distance of the other spouse's tax home. cluded, and how to figure the amount of your allowable
housing exclusion or deduction.
Housing exclusion. Each spouse claiming a housing
exclusion must figure separately the part of the housing Note. Don’t submit Form 2555 by itself.
amount that is attributable to employer-provided amounts,
based on the separate foreign earned income. If you are a U.S. citizen or resident alien who is a citizen
or national of a U.S. treaty country, you can claim the ex-
One Household clusion under the bona fide residence test. You should fill
out Parts I, II, IV, and V of Form 2555. In filling out Part II,
If you and your spouse lived in the same foreign house- be sure to give your visa type and the period of your bona
hold and file a joint return, you must figure your housing fide residence. Frequently, these items are overlooked.
amounts jointly. If you file separate returns, only one U.S. citizens and all resident aliens can claim the exclu-
spouse can claim the housing exclusion or deduction. sion under the physical presence test. You should fill out
Parts I, III, IV, and V of Form 2555. When filling out Part III,
In figuring your housing amount jointly, you can com- be sure to insert the beginning and ending dates of your
bine your housing expenses and figure one base housing 12-month period and the dates of your arrivals and depar-
amount. Either spouse (but not both) can claim the hous- tures, as requested in the travel schedule.
ing exclusion or housing deduction. However, if you and
your spouse have different periods of residence or pres- You must fill out Part VI if you are claiming a foreign
ence and the one with the shorter period of residence or housing exclusion or deduction.
presence claims the exclusion or deduction, you can claim
as housing expenses only the expenses for that shorter If you are claiming the foreign earned income exclusion,
period. fill out Part VII.

Example. Tom and Jane live together and file a joint If you are claiming the foreign earned income exclusion,
return. Tom was a bona fide resident of and had his tax the foreign housing exclusion, or both, fill out Part VIII.
home in Ghana from August 17, 2023, through December Finally, fill out Part IX if you are claiming the foreign
31, 2024. Jane was a bona fide resident of and had her housing deduction.
tax home in Ghana from September 15, 2023, through De-
cember 31, 2024. If you and your spouse both qualify to claim the foreign
During 2023, Tom received $75,000 of foreign earned earned income exclusion, the foreign housing exclusion,
income and Jane received $50,000 of foreign earned in- or the foreign housing deduction, you and your spouse
come. Tom paid $10,000 for housing expenses, of which must file separate Forms 2555 to claim these benefits.
$7,500 was for expenses incurred from September 15 See the discussion earlier under Separate Households.

Publication 54 (2023) Chapter 4 Foreign Earned Income and Housing: 31

Exclusion – Deduction
 If you choose to exclude foreign earned income or
housing amounts, you cannot deduct, exclude, or claim a
5. credit for any item that can be allocated to or charged
against the excluded amounts. This includes any expen-
ses, losses, and other normally deductible items that are
Deductions and Credits allocable to the excluded income. You can deduct only
those expenses connected with earning includible in-
come.
Topics
This chapter discusses: These rules apply only to items definitely related to the
excluded earned income and they do not apply to other
• The rules concerning items related to excluded items that aren’t definitely related to any particular type of
income, gross income. These rules don’t apply to items such as:

• Contributions to foreign charitable organizations, • Qualified retirement contributions,

• Contributions to individual retirement arrangements • Alimony payments,

(IRAs), • Charitable contributions,
• Taxes of foreign countries and U.S. territories, and • Medical expenses,
• How to report deductions. • Mortgage interest, or
• Real estate taxes on your personal residence.
Useful Items
You may want to see: For purposes of these rules, your housing deduction
isn’t treated as allocable to your excluded income, but the
Publication deduction for self-employment tax is.
501 Dependents, Standard Deduction, and Filing If you receive foreign earned income in a tax year after
Information the year in which you earned it, you may have to file an
501

amended return for the earlier year to properly adjust the

514 Foreign Tax Credit for Individuals
514

amounts of deductions, credits, or exclusions allocable to

523 Selling Your Home
523
your foreign earned income and housing exclusions.

590-A Contributions to Individual Retirement Example. In 2022, you had $95,600 of foreign earned
Arrangements (IRAs)
590-A

income and $9,500 of deductions allocable to your foreign

earned income. You did not have a housing exclusion. Be-
597 Information on the United States–Canada
cause you excluded all of your foreign earned income, you
Income Tax Treaty
597

would not have been able to claim any of the deductions

Form (and Instructions) on your 2022 return.
In 2023, you received a $18,000 bonus for work you did
1116 Foreign Tax Credit
1116

abroad in 2022. You can exclude $16,400 of the bonus be-

2106 Employee Business Expenses cause the limit on the foreign earned income exclusion for
2022 was $112,000 and you have already excluded
2106

2555 Foreign Earned Income

2555

$95,600. Since you must include $1,600 of the bonus

Schedule A (Form 1040) Itemized Deductions ($18,000 − $16,400) for work you did in 2022 in income,
you can file an amended return for 2021 to claim $133.80
Schedule A (Form 1040)

Schedule C (Form 1040) Profit or Loss From ($9,500 x $1,600/$113,600) of the deductions. These are
Business
Schedule C (Form 1040)

the deductions allocable to the foreign earned income

SS-5 Application for a Social Security Card ($9,500) multiplied by the includible portion of the foreign
earned income ($1,600) and divided by the total foreign
SS-5

W-7 Application for IRS Individual Taxpayer earned income for 2022 ($113,600).
Identification Number
W-7

See chapter 7 for information about getting these publica-

tions and forms. Contributions to Foreign
Charitable Organizations
Items Related to Excluded If you make contributions directly to a foreign church or
Income other foreign charitable organization, you generally cannot
deduct them. Exceptions are explained under Canadian,
Mexican, and Israeli charities, later.
U.S. citizens and resident aliens living outside the United
States are generally allowed the same deductions as citi- You can deduct contributions to a U.S. organization that
zens and residents living in the United States. transfers funds to a charitable foreign organization if the

32 Chapter 5 Deductions and Credits Publication 54 (2023)

U.S. organization controls the use of the funds by the for- should figure your tax liability both ways and then use the
eign organization or if the foreign organization is just an one that is better for you.
administrative arm of the U.S. organization.
You can make or change your choice within 10 years
Canadian, Mexican, and Israeli charities. Under the in- from the due date for filing the tax return on which you are
come tax treaties with Canada, Mexico, and Israel, you entitled to take either the deduction or the credit.
may be able to deduct contributions to certain Canadian,
Mexican, and Israeli charitable organizations. Generally, Foreign income taxes. These are generally income
you must have income from sources in Canada, Mexico, taxes you pay to any foreign country or U.S. territory.
or Israel, and the organization must meet certain require-
Foreign income taxes on U.S. return. Foreign income
ments. See Pub. 597 and Pub. 526, Charitable Contribu-
taxes can only be taken as a credit on Schedule 3 (Form
tions, for more information.
1040), line 1, or as an itemized deduction on Schedule A
(Form 1040). These amounts cannot be included as with-
held income taxes on Form 1040 or 1040-SR, line 25.
Contributions to Individual
Foreign taxes paid on excluded income. You cannot
Retirement Arrangements take a credit or deduction for foreign income taxes paid on
earnings you exclude from tax under any of the following.
Contributions to your individual retirement arrangements
(IRAs) that are traditional IRAs or Roth IRAs are generally
• Foreign earned income exclusion.
limited to the lesser of $6,500 ($7,500 if 50 or older) or • Foreign housing exclusion.
your compensation that is includible in your gross income • Territory exclusion.
for the tax year. In determining compensation for this pur-
pose, don’t take into account amounts you exclude under If your wages are completely excluded, you can’t deduct
either the foreign earned income exclusion or the foreign or take a credit for any of the foreign taxes paid on your
housing exclusion. Don’t reduce your compensation by wages.
the foreign housing deduction. If only part of your wages is excluded, you can’t deduct
or take a credit for the foreign income taxes allocable to
If you are covered by an employer retirement plan at the excluded part. You find the taxes allocable to your ex-
work, your deduction for your contributions to your tradi- cluded wages by applying a fraction to the foreign taxes
tional IRAs is generally limited based on your modified ad- paid on foreign earned income received during the tax
justed gross income. This is your adjusted gross income year. The numerator (top number) of the fraction is your
figured without taking into account the foreign earned in- excluded foreign earned income received during the tax
come exclusion, the foreign housing exclusion, or the for- year minus deductible expenses allocable to that income
eign housing deduction. Other modifications are also re- (not including the foreign housing deduction). The denom-
quired. For more information on contributions to IRAs, see inator (bottom number) of the fraction is your total foreign
Pub. 590-A. earned income received during the tax year minus all de-
ductible expenses allocable to that income (including the
foreign housing deduction).
Taxes of Foreign Countries and If foreign law taxes both earned income and some other
type of income and the taxes on the other type can’t be
U.S. Territories separated, the denominator of the fraction is the total
amount of income subject to foreign tax minus deductible
You can take either a credit or a deduction for income expenses allocable to that income.
taxes paid to a foreign country or a U.S. territory. Taken as If you take a foreign tax credit for tax on income
a deduction, foreign income taxes reduce your taxable in- you could have excluded under your choice to ex-
come. Taken as a credit, foreign income taxes reduce your
!
CAUTION clude foreign earned income or your choice to ex-
tax liability. You must treat all foreign income taxes the clude foreign housing costs, one or both of the choices
same way. If you take a credit for any foreign income may be considered revoked.
taxes, you cannot deduct any foreign income taxes. How-
ever, you may be able to deduct other foreign taxes. See
Deduction for Other Foreign Taxes, later. Credit for Foreign Income Taxes
There is no rule to determine whether it is to your ad- If you take the foreign tax credit, you may have to file Form
vantage to take a deduction or a credit for foreign income 1116 with Form 1040 or 1040-SR. Form 1116 is used to
taxes. In most cases, it is to your advantage to take foreign figure the amount of foreign tax paid or accrued that can
income taxes as a tax credit, which you subtract directly be claimed as a foreign tax credit. Don’t include the
from your U.S. tax liability, rather than as a deduction in amount of foreign tax paid or accrued as withheld federal
figuring taxable income. However, if foreign income taxes income taxes on Form 1040 or 1040-SR, line 25.
were imposed at a high rate and the proportion of foreign
income to U.S. income is small, a lower final tax may result The foreign income tax for which you can claim a credit
from deducting the foreign income taxes. In any event, you is the amount of legal and actual tax liability you pay or

Publication 54 (2023) Chapter 5 Deductions and Credits 33

accrue during the year. The amount for which you can each category by multiplying them by a fraction. The nu-
claim a credit is not necessarily the amount withheld by merator (top number) of the fraction is your gross foreign
the foreign country. You can’t take a foreign tax credit for income in the separate limit category. The denominator
income tax you paid to a foreign country that would be re- (bottom number) of the fraction is your gross income from
funded by the foreign country if you made a claim for re- all sources. For this purpose, gross income includes in-
fund. come that is excluded under the foreign earned income
provisions but does not include any other exempt income.
Subsidies. If a foreign country returns your foreign tax You must use special rules for deducting interest expen-
payments to you in the form of a subsidy, you cannot claim ses. For more information on allocating and apportioning
a foreign tax credit based on these payments. This rule your deductions, see Pub. 514.
applies to a subsidy provided by any means that is deter-
mined, directly or indirectly, by reference to the amount of Recapture of foreign losses. If you have an overall for-
tax, or to the base used to figure the tax. eign loss and the loss reduces your U.S. source income
Some ways of providing a subsidy are refunds, credits, (resulting in a reduction of your U.S. tax liability with re-
deductions, payments, or discharges of obligations. A spect to U.S. source income), you must recapture the loss
credit is also not allowed if the subsidy is given to a person in later years when you have taxable income from foreign
related to you, or persons who participated in a transac- sources. This is done by treating a part of your taxable in-
tion or a related transaction with you. come from foreign sources in later years as U.S. source
income. This reduces the numerator of the limiting fraction
Limit and the resulting foreign tax credit limit.

The foreign tax credit is limited to the part of your total U.S. Recapture of domestic losses. If you have an overall
tax that is in proportion to your taxable income from sour- domestic loss and the loss reduces your foreign source in-
ces outside the United States compared to your total taxa- come (resulting in a reduction in the amount of foreign tax
ble income. The allowable foreign tax credit can’t be more credit you can claim for taxes paid during that year), you
than your actual foreign tax liability. must recapture the loss in later years when you have U.S.
source taxable income. This is done by treating a part of
Exemption from limit. You won’t be subject to this limit your taxable income from U.S. sources in later years as
and won’t have to file Form 1116 if you meet all three of foreign source income. This increases the numerator of
the following requirements. the limitation fraction and the resulting foreign tax credit
• Your only foreign source income for the year is passive limit.
income (dividends, interest, royalties, etc.) that is re- Foreign tax credit carryback and carryover. The
ported to you on a payee statement (such as a Form amount of foreign income tax not allowed as a credit be-
1099-DIV or 1099-INT). cause of the limit can be carried back 1 year and carried
• Your foreign taxes for the year that qualify for the credit forward 10 years.
are not more than $300 ($600 if you are filing a joint The Schedule B (Form 1116) is used to reconcile your
return) and are reported on a payee statement. prior year foreign tax carryover with your current year for-
eign tax carryover. The schedule replaces the previous at-
• You elect this procedure. tachment requirement for Part III, line 10 (Form 1116). For
If you make this election, you can’t carry back or carry more information, see the Instructions for Schedule B
over any unused foreign tax to or from this year. (Form 1116) and the instructions for Form 1116, line 10, at
IRS.gov/Form1116.
Separate limit. You must figure the limit on a separate
basis with regard to “section 951A category income,” “for-
eign branch category income,” “passive category income,” Deduction for Foreign Income Taxes
“general category income,” “section 901(j) income,” “cer-
tain income re-sourced by treaty,” and any “lump-sum dis- Instead of taking the foreign tax credit, you can deduct for-
tributions” from an employer benefit plan for which the eign income taxes as an itemized deduction on Schedule
special averaging treatment is used to determine your tax A (Form 1040).
(see the Instructions for Form 1116).
You deduct only foreign income taxes paid on income
Figuring the limit. In figuring taxable income in each that is subject to U.S. tax. You can’t deduct foreign taxes
category, you take into account only the amount that you paid on earnings you exclude from tax under any of the
must include in income on your federal tax return. Don’t following.
take any excluded amount into account. • Foreign earned income exclusion.
To determine your taxable income in each category, de-
duct expenses and losses that are definitely related to that • Foreign housing exclusion.
income. • Territory exclusion.
Other expenses (such as itemized deductions or the
standard deduction) not definitely related to specific items Example. You are a U.S. citizen and qualify to exclude
of income must be apportioned to the foreign income in your foreign earned income. Your excluded wages in
Country X are $70,000 on which you paid income tax of

34 Chapter 5 Deductions and Credits Publication 54 (2023)

$10,000. You received dividends from Country X of earned income for the year was $129,875 and your invest-
$2,000 on which you paid income tax of $600. ment income was $8,890. After excluding $120,000, your
You can deduct the $600 tax payment because the divi- adjusted gross income is $18,765.
dends relating to it are subject to U.S. tax. Because you Generally, mortgage interest is deductible on Sched-
exclude your wages, you cannot deduct the income tax of ule A (Form 1040). You paid mortgage interest on your for-
$10,000. eign home of $15,000. Your mortgage is under $750,000.
If you exclude only a part of your wages, see the earlier Reduce the $15,000 of your mortgage interest by 92.3%
discussion under Foreign taxes paid on excluded income. (0.923) ($13,845) because you excluded 92.3% (0.923)
($120,000/$129,875) of your foreign earned income.
Deduction for Other Foreign Taxes The remaining mortgage interest of $1,155 can be de-
ducted on line 8a or 8b of Schedule A (Form 1040).
You cannot deduct other foreign taxes, such as real prop-
erty or personal property taxes, unless you incurred the Example 2. You are a U.S. citizen, have a tax home in
expenses in a trade or business or in the production of in- Spain, and meet the physical presence test. You are
come. self-employed and personal services produce the busi-
ness income. Your gross income was $121,842, business
On the other hand, you can generally deduct real prop- expenses were $67,695, and net income (profit) was
erty or personal property taxes when you pay them to U.S. $54,147. You choose the foreign earned income exclusion
territories. But if you claim the territory exclusion, see Pub. and exclude $120,000 of your gross income. Since your
570. excluded income is 98.48% (0.9848) of your total income,
98.48% (0.9848) of your business expenses are not de-
The deduction for foreign taxes other than foreign in-
ductible. Report your total income and expenses on
come taxes isn’t related to the foreign tax credit. You can
Schedule C (Form 1040). On Form 2555, you will show
take deductions for these miscellaneous foreign taxes and
the following.
also claim the foreign tax credit for income taxes imposed
by a foreign country. • Line 20a, $121,842, gross income.
• Lines 42 and 43, $120,000, foreign earned income ex-
clusion.
How To Report Deductions • Line 44, $66,666 (98.48% (0.9848) × $67,695), busi-
ness expenses attributable to the exclusion.
If you exclude foreign earned income or housing amounts,
how you show your deductions on your tax return and how Example 3. Assume in Example 2 that both capital
you figure the amount allocable to your excluded income and personal services combine to produce the business
depend on whether the expenses are used in figuring ad- income. No more than 30% of your net income or $16,244
justed gross income (Form 1040 or 1040-SR, line 11) or ($54,147 x 30% (0.30)), assuming that this amount is a
are itemized deductions. reasonable allowance for your services, is considered
earned and can be excluded. Your exclusion of $16,244 is
If you have deductions used in figuring adjusted gross
13.33% of your gross income ($16,244 ÷ $121,842). Be-
income, enter the total amount for each of these items on
cause you excluded 13.33% of your net income, $9,024
the appropriate lines and schedules of Form 1040 or
(13.33% (0.1333) x $67,695) of your business expenses
1040-SR. Generally, you figure the amount of a deduction
is attributable to the excluded income and is not deducti-
related to the excluded income by multiplying the deduc-
ble.
tion by a fraction, the numerator of which is your foreign
earned income exclusion and the denominator of which is Example 4. You are a U.S. citizen, have a tax home in
your foreign earned income. Enter the amount of the de- Brazil, and meet the physical presence test. You are
duction(s) related to excluded income on line 44 of Form self-employed and both capital and personal services
2555. combine to produce business income. Your gross income
If you have itemized deductions related to excluded in- was $146,000, business expenses were $172,000, and
come, enter on Schedule A (Form 1040) only the part not your net loss was $26,000. A reasonable allowance for the
related to excluded income. You figure that amount by services you performed for the business is $77,000. Be-
subtracting from the total deduction the amount related to cause you incurred a net loss, the earned income limit of
excluded income. Generally, you figure the amount that is 30% of your net profit does not apply. The $77,000 is for-
related to the excluded income by multiplying the total de- eign earned income. If you choose to exclude the
duction by a fraction, the numerator of which is your for- $77,000, you exclude 52.74% of your gross income
eign earned income exclusion and the denominator of ($77,000 ÷ $146,000), and 52.74% of your business ex-
which is your foreign earned income. Attach a statement penses ($90,713) is attributable to that income and is not
to your return showing how you figured the deductible deductible. Show your total income and expenses on
amount. Schedule C (Form 1040). On Form 2555, exclude $77,000
and show $90,713 on line 44. Subtract line 44 from
Example 1. You are a U.S. citizen employed as an ac- line 43, and enter the difference as a negative (in paren-
countant. Your tax home is in Germany for the entire tax theses) on line 45. Because this amount is negative, enter
year. You meet the physical presence test. Your foreign it as a positive (no parentheses) on line 8d of Schedule 1

Publication 54 (2023) Chapter 5 Deductions and Credits 35

(Form 1040), and combine it with your other income to ar-
rive at total income on line 9 of Schedule 1 (Form 1040).
Purpose of Tax Treaties
In this situation (Example 4), you would probably
TIP not want to choose the foreign earned income ex- The United States has bilateral income tax treaties, also
clusion if this was the first year you were eligible. If known as conventions, with many countries. See Table 3
you had chosen the exclusion in an earlier year, you might under the list of tax treaty tables at IRS.gov/Individuals/
want to revoke the choice for this year. To do so would International-Taxpayers/Tax-Treaty-Tables for a list of coun-
mean that you could not claim the exclusion again for the tries with which the United States has an income tax treaty
next 5 tax years without IRS approval. See Choosing the in effect.
Exclusion in chapter 4.
Under these treaties, citizens and residents of the Uni-
Example 5. You are a U.S. citizen, have a tax home in ted States who are subject to taxes imposed by the for-
Panama, and meet the bona fide residence test. You have eign countries are entitled to certain credits, deductions,
been performing services for clients as a partner in a firm exemptions, and reductions in the rate of taxes of those
that provides services exclusively in Panama. Capital in- foreign countries. If a foreign country with which the Uni-
vestment is not material in producing the partnership's in- ted States has a treaty imposes a tax on you, you may be
come. Under the terms of the partnership agreement, you entitled to benefits under the treaty.
are to receive 50% of the net profits. The partnership re- Treaty benefits are generally available to residents of
ceived gross income of $248,000 and incurred operating the United States. They are generally not available to U.S.
expenses of $102,250. Of the net profits of $145,750, you citizens who do not reside in the United States. However,
received $72,875 as your distributive share. certain treaty benefits and safeguards, such as the non-
You choose to exclude $120,000 of your share of the discrimination provisions, are available to U.S. citizens re-
gross income. Because you exclude 96.77% (0.9677) siding in the treaty countries. U.S. citizens residing in a for-
($120,000 ÷ $124,000) of your share of the gross income, eign country may also be entitled to benefits under that
you cannot deduct $49,474, which is 96.77% (0.9677) of country's tax treaties with third countries.
your share of the operating expenses (96.77% (0.9677) ×
$51,125). Report $72,875, your distributive share of the Certification of U.S. residency. Use Form 8802 to re-
partnership net profit, on Schedule E (Form 1040). On quest certification of U.S. residency for purposes of claim-
Form 2555, show $120,000 on line 42 and show $49,474 ing benefits under a tax treaty. Certification can be reques-
on line 44. Your exclusion on Form 2555 is $70,521. ted for the current and any prior calendar years.
You should examine the specific treaty articles to
TIP find if you are entitled to a tax credit, tax exemp-
tion, reduced rate of tax, or other treaty benefit or
safeguard.
6. For more information on tax treaties, go to IRS.gov/
Individuals/International-Taxpayers/Tax-Treaties.
Tax Treaty Benefits
Common Benefits
Topics
This chapter discusses: Some common tax treaty benefits are explained below.
The credits, deductions, exemptions, reductions in rate,
• Some common tax treaty benefits, and other benefits provided by tax treaties are subject to
• How to get help in certain situations, and conditions and various restrictions. Benefits provided by
certain treaties are not necessarily provided by others.
• How to get copies of tax treaties.
Personal service income. If you are a U.S. resident
Useful Items who is in a treaty country for a limited number of days in
You may want to see: the tax year and you meet certain other requirements, the
payment you receive for personal services performed in
Publication that country may be exempt from that country's income
tax.
597 Information on the United States–Canada
Income Tax Treaty Professors and teachers. If you are a U.S. resident,
597

the payment you receive for the first 2 or 3 years that you
901 U.S. Tax Treaties
are teaching or doing research in a treaty country may be
901

See chapter 7 for information about getting these publica- exempt from that country's income tax.
tions.
Students, trainees, and apprentices. If you are a
U.S. resident, amounts you receive from the United States

36 Chapter 6 Tax Treaty Benefits Publication 54 (2023)

for study, research, or business, professional, and techni- For additional information, go to IRS.gov/Individuals/
cal training in a treaty country may be exempt from a treaty International-Taxpayers/Tax-Treaties.
country's income tax.
Some treaties exempt non-compensatory grants, allow-
ances, and awards received from governmental and cer- Competent Authority
tain nonprofit organizations. Also, under certain circum-
stances, a limited amount of pay received by students, Assistance
trainees, and apprentices for the performance of services
in a treaty country may be exempt from the income tax of If you are a U.S. citizen or resident alien, you can request
many treaty countries. assistance from the U.S. competent authority if you think
that the actions of the United States, a treaty country, or
Pensions and annuities. If you are a U.S. resident, both, cause or will cause a tax situation not intended by
nongovernment pensions and annuities you receive may the treaty between the two countries. You should read any
be exempt from the income tax of treaty countries. treaty articles, including the mutual agreement procedure
Most treaties contain separate provisions for exempting article, that apply in your situation.
government pensions and annuities from treaty country in-
The U.S. competent authority cannot consider requests
come tax, and some treaties provide exemption from the
involving countries with which the United States does not
treaty country's income tax for social security payments.
have a tax treaty.
Investment income. If you are a U.S. resident, invest-
ment income, such as interest and dividends, that you re- Instructions for how to prepare and submit a request
ceive from sources in a treaty country may be exempt from are available at IRS.gov/CompetentAuthority.
that country's income tax or taxed at a reduced rate. Your request for competent authority consideration
Several treaties provide exemption for capital gains should be addressed to:
(other than from sales of real property in most cases) if
Commissioner
specified requirements are met.
Large Business and International Division
Tax credit provisions. If you are a U.S. resident who re- 1111 Constitution Ave. NW
ceives income from or owns capital in a foreign country, Washington, DC 20224
you may be taxed on that income or capital by both the SE:LB:TTPO:APMA:TAIT:
United States and the treaty country. NCA 570-03
Most treaties allow you to take a credit against or de- (Attention: TAIT)
duction from the treaty country's taxes based on the U.S.
tax on the income.
Nondiscrimination provisions. Most U.S. tax treaties
provide that the treaty country cannot discriminate by im-
Obtaining Copies of Tax
posing more burdensome taxes on U.S. citizens who are Treaties
residents of the treaty country than it imposes on its own
citizens in the same circumstances. You can get complete information about treaty provisions
Saving clauses. U.S. treaties contain saving clauses from the taxing authority in the country from which you re-
that provide that the treaties do not affect the U.S. taxation ceive income or from the treaty itself. You can obtain the
of its own citizens and residents. As a result, U.S. citizens text of most U.S. treaties at IRS.gov/Businesses/
and residents cannot generally use the treaty to reduce International-Businesses/United-States-Income-Tax-
their U.S. tax liability. Treaties-A-to-Z.
However, most treaties provide exceptions to saving
clauses that allow certain provisions of the treaty to be If you have questions about a treaty, you can visit
claimed by U.S. citizens or residents. It is important that IRS.gov/Individuals/International-Taxpayers/Tax-Treaties.
you examine the applicable saving clause to determine if
an exception applies.

More information on treaties. Pub. 901 contains an ex-

planation of treaty provisions that apply to amounts re-
ceived by teachers, students, workers, and government 7.
employees and pensioners who are alien nonresidents or
residents of the United States. Since treaty provisions are
generally reciprocal, you can usually substitute “U.S.” for How To Get Tax Help
the name of the treaty country whenever it appears, and
vice versa when “U.S.” appears in the treaty exemption If you are overseas and need tax help, see Taxpayer As-
discussions in Pub. 901. sistance Outside the United States, later.
Pub. 597 contains an explanation of a number of fre-
quently used provisions of the United States–Canada
income tax treaty.

Publication 54 (2023) Chapter 7 How To Get Tax Help 37

 Using online tools to help prepare your return. Go to
Taxpayer Assistance Inside the IRS.gov/Tools for the following.
• The Earned Income Tax Credit Assistant (IRS.gov/
United States EITCAssistant) determines if you’re eligible for the
earned income credit (EIC).
If you have questions about a tax issue; need help prepar-
• The Online EIN Application (IRS.gov/EIN) helps you
ing your tax return; or want to download free publications, get an employer identification number (EIN) at no
forms, or instructions, go to IRS.gov to find resources that cost.
can help you right away.
• The Tax Withholding Estimator (IRS.gov/W4App)
Preparing and filing your tax return. After receiving all makes it easier for you to estimate the federal income
your wage and earnings statements (Forms W-2, W-2G, tax you want your employer to withhold from your pay-
1099-R, 1099-MISC, 1099-NEC, etc.); unemployment check. This is tax withholding. See how your withhold-
compensation statements (by mail or in a digital format) or ing affects your refund, take-home pay, or tax due.
other government payment statements (Form 1099-G);
and interest, dividend, and retirement statements from
• The First-Time Homebuyer Credit Account Look-up
(IRS.gov/HomeBuyer) tool provides information on
banks and investment firms (Forms 1099), you have sev-
your repayments and account balance.
eral options to choose from to prepare and file your tax re-
turn. You can prepare the tax return yourself, see if you • The Sales Tax Deduction Calculator (IRS.gov/
qualify for free tax preparation, or hire a tax professional to SalesTax) figures the amount you can claim if you
prepare your return. itemize deductions on Schedule A (Form 1040).

Free options for tax preparation. Your options for pre- Getting answers to your tax questions. On
paring and filing your return online or in your local com- IRS.gov, you can get up-to-date information on
munity, if you qualify, include the following. current events and changes in tax law.

• Free File. This program lets you prepare and file your • IRS.gov/Help: A variety of tools to help you get an-
federal individual income tax return for free using soft- swers to some of the most common tax questions.
ware or Free File Fillable Forms. However, state tax • IRS.gov/ITA: The Interactive Tax Assistant, a tool that
preparation may not be available through Free File. Go will ask you questions and, based on your input, pro-
to IRS.gov/FreeFile to see if you qualify for free online vide answers on a number of tax law topics.
federal tax preparation, e-filing, and direct deposit or
payment options.
• IRS.gov/Forms: Find forms, instructions, and publica-
tions. You will find details on the most recent tax
• VITA. The Volunteer Income Tax Assistance (VITA) changes and interactive links to help you find answers
program offers free tax help to people with to your questions.
low-to-moderate incomes, persons with disabilities,
and limited-English-speaking taxpayers who need
• You may also be able to access tax law information in
your electronic filing software.
help preparing their own tax returns. Go to IRS.gov/
VITA, download the free IRS2Go app, or call
800-906-9887 for information on free tax return prepa- Need someone to prepare your tax return? There are
ration. various types of tax return preparers, including enrolled
• TCE. The Tax Counseling for the Elderly (TCE) pro- agents, certified public accountants (CPAs), accountants,
gram offers free tax help for all taxpayers, particularly and many others who don’t have professional credentials.
those who are 60 years of age and older. TCE volun- If you choose to have someone prepare your tax return,
teers specialize in answering questions about pen- choose that preparer wisely. A paid tax preparer is:
sions and retirement-related issues unique to seniors. • Primarily responsible for the overall substantive accu-
Go to IRS.gov/TCE or download the free IRS2Go app racy of your return,
for information on free tax return preparation.
• Required to sign the return, and
• MilTax. Members of the U.S. Armed Forces and quali- • Required to include their preparer tax identification
fied veterans may use MilTax, a free tax service of-
number (PTIN).
fered by the Department of Defense through Military
OneSource. For more information, go to Although the tax preparer always signs the return,
MilitaryOneSource (MilitaryOneSource.mil/MilTax). ! you're ultimately responsible for providing all the
Also, the IRS offers Free Fillable Forms, which can CAUTION information required for the preparer to accurately

be completed online and then e-filed regardless of in- prepare your return. Anyone paid to prepare tax returns for
come. others should have a thorough understanding of tax mat-
ters. For more information on how to choose a tax pre-
parer, go to Tips for Choosing a Tax Preparer on IRS.gov.

38 Chapter 7 How To Get Tax Help Publication 54 (2023)

Employers can register to use Business Services On- Disasters. Go to IRS.gov/DisasterRelief to review the
line. The Social Security Administration (SSA) offers on- available disaster tax relief.
line service at SSA.gov/employer for fast, free, and secure
online W-2 filing options to CPAs, accountants, enrolled Getting tax forms and publications. Go to IRS.gov/
agents, and individuals who process Form W-2, Wage Forms to view, download, or print all of the forms, instruc-
and Tax Statement, and Form W-2c, Corrected Wage and tions, and publications you may need. Or, you can go to
Tax Statement. IRS.gov/OrderForms to place an order.

IRS social media. Go to IRS.gov/SocialMedia to see the Getting tax publications and instructions in eBook
various social media tools the IRS uses to share the latest format. Download and view most tax publications and in-
information on tax changes, scam alerts, initiatives, prod- structions (including the Instructions for Form 1040) on
ucts, and services. At the IRS, privacy and security are our mobile devices as eBooks at IRS.gov/eBooks.
highest priority. We use these tools to share public infor- IRS eBooks have been tested using Apple's iBooks for
mation with you. Don’t post your social security number iPad. Our eBooks haven’t been tested on other dedicated
(SSN) or other confidential information on social media eBook readers, and eBook functionality may not operate
sites. Always protect your identity when using any social as intended.
networking site.
Access your online account (individual taxpayers
The following IRS YouTube channels provide short, in-
only). Go to IRS.gov/Account to securely access infor-
formative videos on various tax-related topics in English,
Spanish, and ASL. mation about your federal tax account.

• Youtube.com/irsvideos. • View the amount you owe and a breakdown by tax

year.
• Youtube.com/irsvideosmultilingua.
• See payment plan details or apply for a new payment
• Youtube.com/irsvideosASL. plan.
Watching IRS videos. The IRS Video portal • Make a payment or view 5 years of payment history
(IRSVideos.gov) contains video and audio presentations and any pending or scheduled payments.
for individuals, small businesses, and tax professionals. • Access your tax records, including key data from your
most recent tax return, and transcripts.
Online tax information in other languages. You can
find information on IRS.gov/MyLanguage if English isn’t • View digital copies of select notices from the IRS.
your native language. • Approve or reject authorization requests from tax pro-
fessionals.
Free Over-the-Phone Interpreter (OPI) Service. The
IRS is committed to serving taxpayers with limited-English • View your address on file or manage your communica-
proficiency (LEP) by offering OPI services. The OPI Serv- tion preferences.
ice is a federally funded program and is available at Tax-
payer Assistance Centers (TACs), most IRS offices, and Get a transcript of your return. With an online ac-
every VITA/TCE tax return site. The OPI Service is acces- count, you can access a variety of information to help you
sible in more than 350 languages. during the filing season. You can get a transcript, review
your most recently filed tax return, and get your adjusted
Accessibility Helpline available for taxpayers with gross income. Create or access your online account at
disabilities. Taxpayers who need information about ac- IRS.gov/Account.
cessibility services can call 833-690-0598. The Accessi-
bility Helpline can answer questions related to current and Tax Pro Account. This tool lets your tax professional
future accessibility products and services available in al- submit an authorization request to access your individual
ternative media formats (for example, braille, large print, taxpayer IRS online account. For more information, go to
audio, etc.). The Accessibility Helpline does not have ac- IRS.gov/TaxProAccount.
cess to your IRS account. For help with tax law, refunds, or
Using direct deposit. The safest and easiest way to re-
account-related issues, go to IRS.gov/LetUsHelp.
ceive a tax refund is to e-file and choose direct deposit,
Note. Form 9000, Alternative Media Preference, or which securely and electronically transfers your refund di-
Form 9000(SP) allows you to elect to receive certain types rectly into your financial account. Direct deposit also
of written correspondence in the following formats. avoids the possibility that your check could be lost, stolen,
destroyed, or returned undeliverable to the IRS. Eight in
• Standard Print. 10 taxpayers use direct deposit to receive their refunds. If
• Large Print. you don’t have a bank account, go to IRS.gov/
DirectDeposit for more information on where to find a bank
• Braille.
or credit union that can open an account online.
• Audio (MP3).
• Plain Text File (TXT).
• Braille Ready File (BRF).

Publication 54 (2023) Chapter 7 How To Get Tax Help 39

Reporting and resolving your tax-related identity • Same-Day Wire: You may be able to do same-day
theft issues. wire from your financial institution. Contact your finan-
cial institution for availability, cost, and time frames.
• Tax-related identity theft happens when someone
steals your personal information to commit tax fraud. Note. The IRS uses the latest encryption technology to
Your taxes can be affected if your SSN is used to file a ensure that the electronic payments you make online, by
fraudulent return or to claim a refund or credit. phone, or from a mobile device using the IRS2Go app are
• The IRS doesn’t initiate contact with taxpayers by safe and secure. Paying electronically is quick, easy, and
email, text messages (including shortened links), tele- faster than mailing in a check or money order.
phone calls, or social media channels to request or
verify personal or financial information. This includes What if I can’t pay now? Go to IRS.gov/Payments for
requests for personal identification numbers (PINs), more information about your options.
passwords, or similar information for credit cards, • Apply for an online payment agreement (IRS.gov/
banks, or other financial accounts. OPA) to meet your tax obligation in monthly install-
• Go to IRS.gov/IdentityTheft, the IRS Identity Theft ments if you can’t pay your taxes in full today. Once
Central webpage, for information on identity theft and you complete the online process, you will receive im-
data security protection for taxpayers, tax professio- mediate notification of whether your agreement has
nals, and businesses. If your SSN has been lost or been approved.
stolen or you suspect you’re a victim of tax-related • Use the Offer in Compromise Pre-Qualifier to see if
identity theft, you can learn what steps you should you can settle your tax debt for less than the full
take. amount you owe. For more information on the Offer in
• Get an Identity Protection PIN (IP PIN). IP PINs are Compromise program, go to IRS.gov/OIC.
six-digit numbers assigned to taxpayers to help pre-
vent the misuse of their SSNs on fraudulent federal in- Filing an amended return. Go to IRS.gov/Form1040X
come tax returns. When you have an IP PIN, it pre- for information and updates.
vents someone else from filing a tax return with your Checking the status of your amended return. Go to
SSN. To learn more, go to IRS.gov/IPPIN. IRS.gov/WMAR to track the status of Form 1040-X amen-
Ways to check on the status of your refund. ded returns.

• Go to IRS.gov/Refunds. It can take up to 3 weeks from the date you filed

! your amended return for it to show up in our sys-
• Download the official IRS2Go app to your mobile de- CAUTION tem, and processing it can take up to 16 weeks.
vice to check your refund status.
• Call the automated refund hotline at 800-829-1954. Understanding an IRS notice or letter you’ve re-
The IRS can’t issue refunds before mid-February ceived. Go to IRS.gov/Notices to find additional informa-
for returns that claimed the EIC or the additional tion about responding to an IRS notice or letter.
!
CAUTION child tax credit (ACTC). This applies to the entire
Responding to an IRS notice or letter. You can now
refund, not just the portion associated with these credits.
upload responses to all notices and letters using the
Document Upload Tool. For notices that require additional
Making a tax payment. Payments of U.S. tax must be action, taxpayers will be redirected appropriately on
remitted to the IRS in U.S. dollars. Digital assets are not IRS.gov to take further action. To learn more about the
accepted. Go to IRS.gov/Payments for information on how tool, go to IRS.gov/Upload.
to make a payment using any of the following options.
• IRS Direct Pay: Pay your individual tax bill or estimated Note. You can use Schedule LEP (Form 1040), Re-
tax payment directly from your checking or savings ac- quest for Change in Language Preference, to state a pref-
count at no cost to you. erence to receive notices, letters, or other written commu-
nications from the IRS in an alternative language. You may
• Debit Card, Credit Card, or Digital Wallet: Choose an not immediately receive written communications in the re-
approved payment processor to pay online or by quested language. The IRS’s commitment to LEP taxpay-
phone. ers is part of a multi-year timeline that is scheduled to be-
• Electronic Funds Withdrawal: Schedule a payment gin providing translations in 2023. You will continue to
when filing your federal taxes using tax return prepara- receive communications, including notices and letters, in
tion software or through a tax professional. English until they are translated to your preferred lan-
guage.
• Electronic Federal Tax Payment System: Best option
for businesses. Enrollment is required. Contacting your local TAC. Keep in mind, many ques-
• Check or Money Order: Mail your payment to the ad- tions can be answered on IRS.gov without visiting a TAC.
dress listed on the notice or instructions. Go to IRS.gov/LetUsHelp for the topics people ask about
most. If you still need help, TACs provide tax help when a
• Cash: You may be able to pay your taxes with cash at tax issue can’t be handled online or by phone. All TACs
a participating retail store.

40 Chapter 7 How To Get Tax Help Publication 54 (2023)

now provide service by appointment, so you’ll know in ad- How Else Does TAS Help Taxpayers?
vance that you can get the service you need without long
wait times. Before you visit, go to IRS.gov/TACLocator to TAS works to resolve large-scale problems that affect
find the nearest TAC and to check hours, available serv- many taxpayers. If you know of one of these broad issues,
ices, and appointment options. Or, on the IRS2Go app, report it to them at IRS.gov/SAMS. Be sure to not include
under the Stay Connected tab, choose the Contact Us op- any personal taxpayer information.
tion and click on “Local Offices.”
Low Income Taxpayer Clinics (LITCs)
The Taxpayer Advocate Service (TAS)
LITCs are independent from the IRS and TAS. LITCs rep-
Is Here To Help You resent individuals whose income is below a certain level
What Is TAS? and who need to resolve tax problems with the IRS. LITCs
can represent taxpayers in audits, appeals, and tax collec-
TAS is an independent organization within the IRS that tion disputes before the IRS and in court. In addition,
helps taxpayers and protects taxpayer rights. TAS strives LITCs can provide information about taxpayer rights and
to ensure that every taxpayer is treated fairly and that you responsibilities in different languages for individuals who
know and understand your rights under the Taxpayer Bill speak English as a second language. Services are offered
of Rights. for free or a small fee. For more information or to find an
LITC near you, go to the LITC page at
How Can You Learn About Your Taxpayer TaxpayerAdvocate.IRS.gov/LITC or see IRS Pub. 4134,
Low Income Taxpayer Clinic List, at IRS.gov/pub/irs-pdf/
Rights? 4134.pdf.
The Taxpayer Bill of Rights describes 10 basic rights that
all taxpayers have when dealing with the IRS. Go to
TaxpayerAdvocate.IRS.gov to help you understand what Taxpayer Assistance Outside
these rights mean to you and how they apply. These are
your rights. Know them. Use them. the United States
If you are outside the United States, you can call
What Can TAS Do for You? 267-941-1000 (English-speaking only). This num-
ber is not toll free.
TAS can help you resolve problems that you can’t resolve
with the IRS. And their service is free. If you qualify for Fax 681-247-3101 (for international tax account
their assistance, you will be assigned to one advocate issues only).
who will work with you throughout the process and will do
everything possible to resolve your issue. TAS can help
If you wish to write instead of calling, please ad-
you if:
dress your letter to:
• Your problem is causing financial difficulty for you,
your family, or your business; Internal Revenue Service
International Accounts
• You face (or your business is facing) an immediate Philadelphia, PA 19255-0725
threat of adverse action; or U.S.A.
• You’ve tried repeatedly to contact the IRS but no one
has responded, or the IRS hasn’t responded by the
date promised. Additional contacts for taxpayers who live outside the Uni-
ted States are available at IRS.gov/uac/Contact-My-Local-
How Can You Reach TAS? Office-Internationally.

Taxpayer Advocate Service (TAS). If you live outside

TAS has offices in every state, the District of Columbia,
the United States, you can call TAS at +15.15.56.46.827.
and Puerto Rico. To find your advocate’s number:
Your call will be automatically routed to Hawaii or Puerto
• Go to TaxpayerAdvocate.IRS.gov/Contact-Us; Rico depending on your location. If you select Spanish,
• Download Pub. 1546, The Taxpayer Advocate Service your call will be routed to the Puerto Rico office for assis-
Is Your Voice at the IRS, available at IRS.gov/pub/irs- tance. You can contact TAS at:
pdf/p1546.pdf; Internal Revenue Service
• Call the IRS toll free at 800-TAX-FORM Taxpayer Advocate Service
(800-829-3676) to order a copy of Pub. 1546; City View Plaza, 48 Carr 165, 5th floor, Suite 200,
Guaynabo, P.R. 00968-8000
• Check your local directory; or
• Call TAS toll free at 877-777-4778.

Publication 54 (2023) Chapter 7 How To Get Tax Help 41

 You can call TAS toll free at 877-777-4778. For
more information on TAS and contacts if you are
outside of the United States, go to
TaxpayerAdvocate.IRS.gov/Get-Help/International/.

42 Publication 54 (2023)
Questions and Answers
This section answers tax-related questions commonly States and won’t qualify for the foreign earned income ex-
asked by taxpayers living abroad. clusion. You must report your worldwide income on the re-
Filing Requirements—Where, When, and How turn. If you paid a foreign tax on the income earned
abroad, you may be able to either deduct this tax as an
1) When are U.S. income tax returns due? itemized deduction or claim it as a credit against your U.S.
income tax.
Generally, for calendar-year taxpayers, U.S. income tax re- However, if you pay the tax due after the regular due
turns are due on April 15. If you are a U.S. citizen or resi- date, interest will be charged from the regular due date
dent and both your tax home and your abode are outside until the date the tax is paid.
the United States and Puerto Rico on the regular due
date, an automatic extension is granted to June 15 for fil- 5) I am a U.S. citizen and have no taxable income
ing the return. Interest will be charged on any tax due, as from the United States, but I have substantial income
shown on the return, from April 15. from a foreign source. Am I required to file a U.S.
income tax return?
2) I am going abroad this year and expect to qualify
for the foreign earned income exclusion. How can I Yes. All U.S. citizens and resident aliens are subject to
secure an extension of time to file my return, when U.S. tax on their worldwide income. If you paid taxes to a
should I file my return, and what forms are required? foreign government on income from sources outside the
United States, you may be able to claim a foreign tax
a) You should file Form 2350 by the due date of your re- credit against your U.S. income tax liability for the foreign
turn to request an extension of time to file. Form 2350 is a taxes paid. Form 1116 is used to figure the allowable
special form for those U.S. citizens or residents abroad credit.
who expect to qualify for the foreign earned income exclu-
sion or the housing exclusion or deduction under either 6) I am a U.S. citizen who has retired, and I expect to
the bona fide residence test or physical presence test and remain in a foreign country. Do I have any further
would like to have an extension of time to delay filing until U.S. tax obligations?
after they have qualified.
b) If the extension is granted, you should file your return Your U.S. tax obligation on your income is the same as
after you qualify, but by the approved extension date. that of a retired person living in the United States. (See the
discussion on filing requirements in chapter 1 of this publi-
c) You must file your Form 1040 or 1040-SR with Form cation.)
2555.
7) I have been a bona fide resident of a foreign
3) My entire income qualifies for the foreign earned country for over 5 years. Is it necessary for me to pay
income exclusion. Must I file a tax return? estimated tax?

Generally, yes. Every U.S. citizen or resident who receives U.S. taxpayers overseas have the same requirements for
income must file a U.S. income tax return unless total in- paying estimated tax as those in the United States. See
come without regard to the foreign earned income exclu- the discussion under Estimated Tax Payments in chap-
sion is below an amount based on filing status. The in- ter 1.
come levels for filing purposes are discussed under Filing
Requirements in chapter 1. Overseas taxpayers should not include in their estima-
ted income any income they receive that is, or will be, ex-
4) I was sent abroad by my company in November of empt from U.S. taxation.
last year. I plan to secure an extension of time on
Overseas taxpayers can deduct their estimated hous-
Form 2350 to file my tax return for last year because I
ing deduction in figuring their estimated tax.
expect to qualify for the foreign earned income
exclusion under the physical presence test. However, The first installment of estimated tax is due on April 15
if my company recalls me to the United States before of the year for which the income is earned.
the end of the qualifying period and I find I will not
qualify for the exclusion, how and when should I file 8) Will a check payable in foreign currency be
my return? acceptable in payment of my U.S. tax?
If your regular filing date has passed, you should file a re- Generally, only U.S. currency is acceptable for payment of
turn, Form 1040 (Form 1040 or 1040-SR for 2023), as income tax. However, if you are a Fulbright grantee, see
soon as possible for last year. Include a statement with Fulbright Grant in chapter 1.
this return noting that you have returned to the United

Publication 54 (2023) 43
9) I have met the test for physical presence in a of foreign earned income. This allows you to file only once
foreign country and am filing returns for 2 years. and saves you from paying the tax and waiting for a re-
Must I file a separate Form 2555 with each return? fund. However, interest is charged on any tax due on the
postponed tax return, but interest is not paid on refunds
Yes. A Form 2555 must be filed with each Form 1040 or paid within 45 days after the return is filed.
1040-SR tax return on which the benefits of income
earned abroad are claimed. 13) I am a U.S. citizen. I have lived abroad for a
number of years and recently realized that I should
10) Does a Form 2555 with a Schedule C or Form W-2 have been filing U.S. income tax returns. How do I
attached constitute a return? correct this oversight in not having filed returns for
these years?
No. The Form 2555, Schedule C, and Form W-2 are
merely attachments and do not relieve you of the require- File the late returns as soon as possible, stating your rea-
ment to file a Form 1040 or 1040-SR to show the sources son for filing late. For advice on filing the returns, you
of income reported and the exclusions or deductions should contact an IRS representative.
claimed.
14) In 2016, I qualified to exclude my foreign earned
11) On Form 2350, Application for Extension of Time income, but I did not claim this exclusion on the
To File U.S. Income Tax Return, I stated that I would return I filed in 2017. I paid all outstanding taxes with
qualify for the foreign earned income exclusion the return. Can I file a claim for refund now?
under the physical presence test. If I qualify under
the bona fide residence test, can I file my return on It is too late to claim this refund because a claim for refund
that basis? must be filed within 3 years from the date the return was
filed or 2 years from the date the tax was paid, whichever
Yes. You can claim the foreign earned income exclusion is later. A return filed before the due date is considered
and the foreign housing exclusion or deduction under ei- filed on the due date.
ther test as long as you meet the requirements. You are
not bound by the test indicated in the application for ex- Meeting the Requirements of Either the Bona Fide
tension of time. You must be sure, however, that you file Residence Test or the Physical Presence Test
the Form 1040 or 1040-SR by the date approved on Form
2350, because a return filed after that date may be subject 1) I recently came to Country X to work for the
to a failure-to-file penalty. Orange Tractor Co. and I expect to be here for 5 or 6
If you will not qualify under the bona fide residence test years. I understand that upon the completion of 1 full
until a date later than the extension granted under the year I will qualify for an exclusion or deduction under
physical presence rule, apply for a new extension to a the bona fide residence test. Is this correct?
date 30 days beyond the date you expect to qualify as a
bona fide resident. Not necessarily. The law provides that to qualify under this
test for the foreign earned income exclusion, the foreign
12) I am a U.S. citizen who worked in the United housing exclusion, or the foreign housing deduction, a
States for 6 months last year. I accepted employment person must be a bona fide resident of a foreign country
overseas in July of last year and expect to qualify for or countries for an uninterrupted period that includes an
the foreign earned income exclusion. Should I file a entire tax year.
return and pay tax on the income earned in the
If, like most U.S. citizens, you file your return on a calen-
United States during the first 6 months and then,
dar-year basis, the tax year referred to in the law would be
when I qualify, file another return covering the last 6
from January 1 to December 31 of any particular year. Un-
months of the year?
less you established residence in Country X on January 1,
it would be more than 1 year before you would be a bona
No. You have the choice of one of the following two meth- fide resident of a foreign country. Once you have comple-
ods of filing your return. ted your qualifying period, however, you are entitled to ex-
a) You can file your return when due under the regular clude the income or to claim the housing exclusion or de-
filing rules, report all your income without excluding your duction from the date you established bona fide
foreign earned income, and pay the tax due. After you residence.
have qualified for the exclusion, you can file an amended
return, Form 1040-X, accompanied by Form 2555, for a 2) I understand the physical presence test to be
refund of any excess tax paid. simply a matter of being physically present in a
b) You can postpone the filing of your tax return by ap- foreign country for at least 330 days within 12
plying on Form 2350 for an extension of time to file to a consecutive months, but what are the criteria of the
date 30 days beyond the date you expect to qualify under bona fide residence test?
either the bona fide residence test or the physical
presence test, then file your return reflecting the exclusion

44 Publication 54 (2023)
To be a bona fide resident of a foreign country, you must 6) Can a resident alien of the United States qualify
show that you entered a foreign country intending to re- for an exclusion or deduction under the bona fide
main there for an indefinite or prolonged period and, to residence test or the physical presence test?
that end, you are making your home in that country. Con-
sideration is given to the type of quarters occupied, Resident aliens of the United States can qualify for the for-
whether your family went with you, the type of visa, the eign earned income exclusion, the foreign housing exclu-
employment agreement, and any other factor pertinent to sion, or the foreign housing deduction if they meet the re-
show whether your stay in the foreign country is indefinite quirements of the physical presence test. Resident aliens
or prolonged. who are citizens or nationals of a country with which the
To claim the foreign earned income exclusion or foreign United States has an income tax treaty in effect can also
housing exclusion or deduction under this test, the period qualify under the bona fide residence test.
of foreign residence must include 1 full tax year (usually
January 1–December 31), but once you meet this time re- 7) On August 13 of last year, I left the United States
quirement, you figure the exclusions and the deduction and arrived in Country Z to work for the Gordon
from the date the residence actually began. Manufacturing Company. I expected to be able to
exclude my foreign earned income under the
3) To meet the qualification of “an uninterrupted physical presence test because I planned to be in
period that includes an entire tax year,” do I have to Country Z for at least 1 year. However, I was
be physically present in a foreign country for the reassigned back to the United States and left
entire year? Country Z on July 1 of this year. Can I exclude any of
my foreign earned income?
No. “Uninterrupted” refers to the bona fide residence
proper and not to the physical presence of the individual. No. You can’t exclude any of the income you earned in
During the period of bona fide residence in a foreign coun- Country Z because you were not in a foreign country for at
try, even during the first full year, you can leave the country least 330 full days as required under the physical pres-
for brief and temporary trips back to the United States or ence test.
elsewhere for vacation, or even for business. To preserve
your status as a bona fide resident of a foreign country, Foreign Earned Income
you must have a clear intention of returning from those
trips, without unreasonable delay, to your foreign resi- 1) I am an employee of the U.S. Government working
dence. abroad. Can all or part of my government income
earned abroad qualify for the foreign earned income
4) I am a U.S. citizen and during 2022 was a bona fide exclusion?
resident of Country X. On January 15, 2023, I was
notified that I was to be assigned to Country Y. I was No. The foreign earned income exclusion applies to your
recalled to New York for 90 days of orientation and foreign earned income. Amounts paid by the United
then went to Country Y, where I have been since. States or its agencies to their employees aren’t treated, for
Although I was not in Country Y on January 1, I was a this purpose, as foreign earned income.
bona fide resident of Country X and was in Country Y
on December 31, 2023. My family remained in 2) I qualify for the foreign earned income exclusion
Country X until completion of the orientation period, under the bona fide residence test. Does my foreign
and my household goods were shipped directly to earned income include my U.S. dividends and the
my new post. Am I a bona fide resident of a foreign interest I receive on a foreign bank account?
country for 2023, or must I wait for the entire year of
2024 to become one? No. The only income that is foreign earned income is in-
come from the performance of personal services abroad.
Because you did not break your period of foreign resi- Investment income isn’t earned income. However, you
dence, you would continue to be a bona fide resident of a must include it in gross income reported on your Form
foreign country for 2023. 1040 or 1040-SR.

5) Due to illness, I returned to the United States 3) My company pays my foreign income tax on my
before I completed my qualifying period to claim the foreign earnings. Is this taxable compensation?
foreign earned income exclusion. Can I figure the
exclusion for the period I resided abroad? Yes. The amount is compensation for services performed.
The tax paid by your company should be reported on
No. You aren’t entitled to any exclusion of foreign earned Form 1040 or 1040-SR, line 1h, and on Form 2555, Part
income because you did not complete your qualifying pe- IV, line 22f.
riod under either the bona fide residence test or physical
presence test. If you paid foreign tax on the income
earned abroad, you may be able to claim that tax as a
deduction or as a credit against your U.S. tax.

Publication 54 (2023) 45
4) I live in an apartment in a foreign city for which my To be eligible, you must have a tax home in a foreign
employer pays the rent. Should I include in my country and be a U.S. citizen or resident alien. You must
income the cost to my employer ($1,200 a month) or be either a bona fide resident of a foreign country or coun-
the fair market value of equivalent housing in the tries for an uninterrupted period that includes an entire tax
United States ($800 a month)? year, or you must be physically present in a foreign coun-
try or countries for at least 330 full days during any period
You must include in income the fair market value (FMV) of of 12 consecutive months. U.S. citizens may qualify under
the facility provided, where it is provided. This will usually either test. The physical presence test applies to all resi-
be the rent your employer pays. Situations when the FMV dent aliens, while the bona fide residence test applies to
is not included in income are discussed in chapter 4 under resident aliens who are citizens or nationals of a country
Exclusion of Meals and Lodging. with which the United States has an income tax treaty in
effect.
5) My U.S. employer pays my salary into my U.S.
Your tax home must be in the foreign country or coun-
bank account. Is this income considered earned in
tries throughout your period of residence or presence. For
the United States or is it considered foreign earned
this purpose, your period of physical presence is the 330
income?
full days during which you are present in a foreign country,
not the 12 consecutive months during which those days
If you performed the services to earn this salary outside
occur.
the United States, your salary is considered earned
abroad. It does not matter that you are paid by a U.S. em-
3) Is it true that my foreign earned income exclusion
ployer or that your salary is deposited in a U.S. bank ac-
cannot exceed my foreign earned income?
count in the United States. The source of salary, wages,
commissions, and other personal service income is the
place where you perform the services. Yes. The amount of the exclusion is limited each year to
the amount of your foreign earned income after reducing
that income by the foreign housing exclusion. The foreign
6) What is considered a foreign country?
earned income must be earned during the part of the tax
year that you have your tax home abroad and meet either
For the purposes of the foreign earned income exclusion
the bona fide residence test or the physical presence test.
and the foreign housing exclusion or deduction, any terri-
tory under the sovereignty of a country other than the Uni-
4) My wife and I are both employed, reside together,
ted States is a foreign country. U.S. territories are not trea-
and file a joint return. We meet the qualifications for
ted as foreign countries.
claiming the foreign earned income exclusion. Do we
each figure a separate foreign earned income
7) What is the source of earned income?
exclusion and foreign housing exclusion?
The source of earned income is the place where the work
You figure your foreign earned income exclusion sepa-
or personal services that produce the income are per-
rately because you both have foreign earned income. The
formed. In other words, income received for work in a for-
amount of the exclusion for each of you can’t exceed your
eign country has its source in that country. The foreign
separate foreign earned incomes.
earned income exclusion and the foreign housing exclu-
sion or deduction are limited to earned income from sour- You must figure your housing exclusion jointly. See Mar-
ces within foreign countries. ried Couples in chapter 4 for further details.

Foreign Earned Income Exclusion Social Security and Railroad Retirement Benefits

1) I qualify for the foreign earned income exclusion 1) Are U.S. social security benefits taxable?
and earned more than $120,000 during 2023. Am I
entitled to the maximum $120,000 exclusion? Benefits received by U.S. citizens and resident aliens may
be taxable, depending on the total amount of income and
Not necessarily. Although you qualify for the foreign the filing status of the taxpayer. Under certain treaties,
earned income exclusion, you may not have met either the U.S. social security benefits are exempt from U.S. tax if
bona fide residence test or the physical presence test for taxed by the country of residence.
your entire tax year. If you didn’t meet either of these tests
for your entire tax year, you must prorate the maximum ex- Benefits similar to social security received from other
clusion based on the number of days that you did meet ei- countries by U.S. citizens or residents may be taxable.
ther test during the year. (Refer to U.S. tax treaties with various countries for any
benefit granted by the treaty.)
2) How do I qualify for the foreign earned income
exclusion? 2) As a U.S. citizen or resident alien, how do I figure
the amount of my U.S. social security benefits to
include in gross income?

46 Publication 54 (2023)
See Pub. 915 to figure if any of your benefits are includible File a statement in duplicate with your employer stating
in income. that withholding should be reduced because you meet the
bona fide residence test or physical presence test. Also,
3) How are railroad retirement benefits taxed? see the following question.

The part of a tier 1 railroad retirement benefit that is equiv- 2) Does the IRS provide forms to be used by
alent to the social security benefit you would have been employees requesting employers to stop withholding
entitled to receive if the railroad employee's work had income tax from wages they expect to be excluded
been covered under the social security system rather than as income earned abroad?
the railroad retirement system is treated the same as a so-
cial security benefit, discussed above. Yes. Form 673 is a sample statement that can be used by
individuals who expect to qualify for the foreign earned in-
The other part of a tier 1 benefit that is not considered a come exclusion under the bona fide residence test or the
social security equivalent benefit is treated like a private physical presence test.
pension or annuity, as are tier 2 railroad retirement bene-
fits. Pensions and annuities are explained in chapter 4 un- 3) I am a U.S. citizen residing overseas, and I receive
der Earned and Unearned Income. Vested dual benefits dividend and interest income from U.S. sources from
and supplemental annuities are also treated like private which tax is being withheld at a rate of 30%. How can
pensions, but are fully taxable. I have this situation corrected?
The proper amounts of the social security equivalent
File Form W-9 (indicating that you are a U.S. citizen) with
part of tier 1 benefits and any special guaranty benefits
the withholding agents who are paying you the dividends
are shown on the Form RRB-1099 that you receive from
and interest. This is their authority to stop withholding the
the Railroad Retirement Board. The taxable amounts of
30% income tax at the source on payments due to you.
the non-social security equivalent part of tier 1, tier 2, ves-
ted dual benefits, and supplemental annuities are shown
4) As a U.S. citizen receiving dividend and interest
on the Form RRB-1099-R that you receive from the Rail-
income from the United States from which tax has
road Retirement Board.
been withheld, do I report the net dividend and
interest income on my return, or do I report the gross
Social Security Tax and Self-Employment Tax amount and take credit for the tax withheld?

1) I am a minister with earned income from abroad You must report the gross amount of the income received
and expect to qualify for the foreign earned income and take a tax credit for the tax withheld. This is to your
exclusion. How do I pay my self-employment tax? advantage because the tax withheld is deducted in full
from the tax due. It is also advisable to attach a statement
File a Form 1040 or 1040-SR with Schedule SE (Form to your return explaining this tax credit so there will be no
1040) and Form 2555. Figure your self-employment tax on question as to the amount of credit allowable.
Schedule SE (Form 1040) and enter it on Schedule 2
(Form 1040) as the tax due with the return.
Deductions
2) Because I expect to qualify for the foreign earned
1) Can I claim a foreign tax credit even though I do
income exclusion, I have requested and received an
not itemize deductions?
extension of time until January 30, 2025, to file my
2023 return. However, since I will be paying
Yes. You can claim the foreign tax credit even though you
self-employment tax on my spouse's income, should
don’t itemize deductions.
I file a 2023 return when due, pay the
self-employment tax, and then file another return
when I qualify for the exclusion? 2) I had to pay customs duty on a few things I
brought back with me from Europe last summer. Can
I include customs fees with my other deductible
No. You don’t need to file a 2023 Form 1040 or 1040-SR
taxes?
(the regular income tax return) when due if you have re-
ceived an extension. Instead, you should pay enough esti-
mated tax to cover the self-employment tax and any in- No. Customs duties, like federal excise taxes, aren’t de-
come tax that would be due after taking out the amount of ductible.
excludable income.
3) What types of foreign taxes are deductible?
Income Tax Withholding Generally, foreign income taxes are deductible as itemized
deductions. Foreign income taxes are deductible only if
1) How can I get my employer to stop withholding you do not claim the foreign tax credit. Foreign income
federal income taxes from wages while I am overseas
and eligible for the foreign earned income exclusion?

Publication 54 (2023) 47
taxes paid on excluded income aren’t deductible as an To correct a mistake of this sort, you should prepare Form
itemized deduction. 1040-X. Include the omitted interest income, refigure the
tax, and send the form as soon as possible along with any
Other foreign taxes, such as real property or personal additional tax due to the Internal Revenue Service Center
property taxes, are only deductible if you incurred the ex- where you filed your return. You may also be able to file
penses in a trade or business or in the production of in- your Form 1040-X electronically.
come.
Use Form 1040-X to correct an individual Form 1040 or
Note. Foreign income taxes are usually claimed under 1040-SR income tax return filed for any year for which the
the credit provisions, if they apply, because this is more period of limitations has not expired (usually 3 years after
advantageous in most cases. the due date of the return filed, or 2 years after the tax was
Scholarship and Fellowship Grantees paid, whichever is later).

1) I am a Fulbright grantee. What documentation 5) I am a U.S. citizen and, because I expect to qualify
must I attach to my return? for the foreign earned income exclusion, all my
foreign income (which consists solely of salary) will
be exempt from U.S. tax. Do I get any tax benefit from
a) There are no special tax forms for Fulbright grantees.
income tax I paid on this salary to a foreign country
File on a regular Form 1040 or 1040-SR.
during the tax year?
b) If you claim exemption as a scholarship or fellowship
grantee, submit brochures and correspondence describ- No. You can’t take either a tax credit or a tax deduction for
ing the grant and your duties. foreign income taxes paid on income that is exempt from
U.S. tax because of the foreign earned income exclusion.
c) If you are located in a foreign country and wish to pay
tax in foreign currency, you should submit a certified state- 6) I am a U.S. citizen stationed abroad. I made a
ment showing that you were a Fulbright grantee and at personal loan to a nonresident alien who later went
least 70% of the grant was paid in nonconvertible foreign bankrupt. Can I claim a bad debt loss for this
currency. money?

2) I taught and lectured abroad under taxable grants. Yes. The loss should be reported as a short-term capital
What expenses can I deduct? loss on Schedule D (Form 1040). You have the burden of
proving the validity of the loan, the subsequent bank-
You may be able to deduct your travel, meals, and lodging ruptcy, and the recovery or nonrecovery from the loan.
expenses if you are temporarily absent from your regular
place of employment. For more information about deduct- 7) With which countries does the United States have
ing travel, meals, and lodging expenses, see Pub. 463, tax treaties?
Travel, Gift, and Car Expenses.
General Tax Questions Table 3 under the list of tax treaty tables at IRS.gov/
Individuals/International-Taxpayers/Tax-Treaty-Tables lists
1) Can IRS personnel recommend tax practitioners those countries with which the United States has income
who prepare returns? tax treaties.

No. IRS employees aren’t permitted to recommend tax 8) I am a retired U.S. citizen living in Europe. My only
practitioners who prepare income tax returns. income is from U.S. sources on which I pay U.S.
taxes. I am taxed on the same income in the foreign
2) I just filed my return. How do I check the status of country where I reside. How do I avoid double
my refund? taxation?

See Refund Information in your tax return instructions. If you reside in a country that has an income tax treaty
with the United States, the treaty will generally contain
3) I haven’t received my refund from last year's provisions to eliminate double taxation. Many treaties will
return. Can I claim the credit against this year's tax? provide reduced rates for various types of income. Trea-
ties often provide reciprocal credits in one country for the
No. That would cause problems to both years' returns. If tax paid to the other country. Nontreaty countries, depend-
your last year's refund is overdue, call or write the IRS. If ing on their laws, may give the same type of credit.
you write to the IRS, be sure to include your social security If double taxation with a treaty country exists and you
number (or individual taxpayer identification number) in cannot resolve the problem with the tax authorities of the
the letter. foreign country, you can contact the U.S. competent au-
thority for assistance. See chapter 6 for information on re-
4) I forgot to include interest income when I filed my questing consideration.
return last week. What should I do?

48 Publication 54 (2023)
9) My total income after claiming the foreign earned It may be advantageous to choose to treat your nonres-
income and housing exclusions consists of $5,000 ident alien spouse as a U.S. resident and file a joint in-
taxable wages. Am I entitled to claim the earned come tax return. Once you make the choice, however, you
income credit? must report the worldwide income of both yourself and
your spouse.
No. If you claim the foreign earned income exclusion, the
For more information on head of household filing sta-
foreign housing exclusion, or the foreign housing deduc-
tus, get Pub. 501.
tion, you can’t claim the earned income credit.
Penalties and Interest
10) I am claiming the foreign earned income
exclusion. Can I take the additional child tax credit? 1) Does the June 15 extended due date for filing my
return because both my tax home and my abode are
No. You can’t take the additional child tax credit if you outside the United States and Puerto Rico on the
claim either the foreign earned income or foreign housing regular due date relieve me from having to pay
exclusion, or the foreign housing deduction. interest on tax not paid by April 15?

11) Last May, my employer transferred me to our No. An extension, whether an automatic extension or one
office in Puerto Rico. I understand that my salary requested in writing, does not relieve you of the payment
earned in Puerto Rico is tax exempt. Is this correct? of interest on the tax due as of April 15 following the year
for which the return is filed. The interest should be inclu-
As long as your employer is not the U.S. Government, all ded in your payment.
income from sources within Puerto Rico is exempt from
U.S. tax if you are a bona fide resident of Puerto Rico dur- 2) If I wait to file my return until I qualify for the
ing the entire tax year. The income you received from Pu- foreign earned income exclusion, I will be charged
erto Rican sources the year you moved to Puerto Rico is interest on the U.S. tax I will owe. To avoid being
not exempt. The tax paid to Puerto Rico in the year you charged interest, can I file my return on time,
moved to Puerto Rico can be claimed as a foreign tax reporting only my taxable income, excluding my
credit on Form 1116. salary for services abroad that will be exempt after I
have met the qualifications?
12) I am a U.S. citizen married to a nonresident alien.
Can I qualify to use the head of household tax rates? No. If you file a return before you qualify for the exclusion,
you must report all income, including all income for serv-
Yes. Although your nonresident alien spouse cannot qual- ices performed abroad, and pay tax on all of it. After you
ify you as a head of household, you may qualify if you meet the qualifications, you can file a claim for refund by
maintain a household for a qualifying child or other rela- excluding the income earned abroad. If you defer the filing
tive. of your return, you can avoid interest on tax due on your
return to be filed by paying the tax you estimate you will
If your spouse was a nonresident alien at any time dur-
owe with your request for an extension of time to file on
ing the year and you do not choose to treat your nonresi-
Form 2350, or by paying enough estimated tax to cover
dent alien spouse as a resident alien, then you are treated
any tax that you expect will be due on the return.
as unmarried for head of household purposes. You must
have another qualifying person and meet the other tests to
be eligible to file as head of household. You can use the
head of a household column in the Tax Table or Section D
of the Tax Computation Worksheet.

Publication 54 (2023) 49
 To help us develop a more useful index, please let us know if you have ideas for index entries.
Index See “Comments and Suggestions” in the “Introduction” for the ways you can reach us.

Revoking choice 28
A E Foreign housing exclusion:
Alien: Earned income Earned income credit 30
Resident 2 Foreign 21, 25, 45 Foreign tax credit 30
American Institute in Taiwan, U.S. Source of 22 Foreign housing exclusion/
employees of 25 Types of 22-24 deduction
American Samoa, territory Earned income credit 28, 30 Carryover of deduction 30
exclusion 17 Employer-provided amounts 30 Deduction, figuring 30
Apprentices, treaty benefits for 36 Estimated tax 10 Exclusion, figuring 30
Assistance (See Tax help) Exclusion Housing amount 29
Foreign earned income 26, 27 Housing expenses 29
B Housing 30 Married couples 31
Bilateral social security Meals and lodging 25 Requirements 15-25
agreements 13 U.S. territories 17 Second foreign household 29
Blocked income 6 Extensions Foreign tax credit:
Bona fide residence test Filing income tax return 5 Earned income exclusion 28, 30
Defined 18 Meeting bona fide residence or Foreign taxes
First year 19 physical presence test 6 Credit for 11, 33-35
Last year 19 Deduction for 33, 35, 47
Meeting the requirements 44 F Paid on excluded income 33
Qualifying for 18, 19 Fellowships 23 Form
Treaty provisions 18 Figuring actual tax 7 1040-ES 10
Voting by absentee ballot 19 Figuring estimated tax on 1040-X 6, 9
Waiver of time requirements 20 nonconvertible foreign 1116 33
currency 7 2032 13
C Filing information 2350 6
Camps, foreign 25 Estimated tax 10 2555 27, 31
Carryover of housing deduction 30 Filing requirements 4 3115 7
Child tax credit 28, 30, 31 Nonresident spouse treated as 4361 14
Choosing the exclusion 27 resident 9 4563 17
Clergy, self-employment tax on 14 Filing requirements 4868 5
Community income 27 By filing status 4 673 11
Competent authority assistance 37 Foreign currency 6 8689 8
Contributions: When to file and pay 4, 43 W-4 11
To foreign charitable Where to file 8, 43 Frequently asked questions
organizations 32 Foreign (FAQs) 43-49
To IRAs 33 Camps 25 Fulbright grant 7, 48
Conventions, income tax 36 Country, defined 17
Credit Currency 6 G
Earned income 28, 30 Earned income 21-25, 45 General tax questions 48
Foreign tax 11, 33-35 Household, second 29 Green card test 2
Related to excluded income 32 Foreign currency, deposit with Guam:
Currency: disbursing officer 7 Residents of 8
Foreign 6 Foreign earned income Territory exclusion 17
Defined 21-25 Where to file 8
D U.S. Government employees 24, 25
Deductions Foreign earned income exclusion H
Contributions to foreign charitable Choosing 27 Housing
organizations 32 Defined 26 Amount 29, 30
Foreign taxes 33-35, 37, 47 Earned income credit 28 Deduction 28, 30
Housing, foreign 30 Foreign tax credit 28 Exclusion 28-30
IRA contributions 33 Income received after year Expenses 29
Related to excluded income 32 earned 26, 27
Reporting 35 Limit 26, 27, 46 I
Deposit of foreign currency with Maximum exclusion 26, 27
Income
disbursing officer 7 Part-year exclusion 27
Apprentices, treaty benefits for 36
Physical presence test, maximum
exclusion 27 Artist 23
Requirements 15-25 Blocked 6

50 Publication 54 (2023)
 Community 27 Territory exclusion 17 Social security number:
Corporation 22 Where to file 9 Nonresident spouse 9
Earned 21-25, 45 Source of earned income 22
Employer's property or facilities, use P Students, treaty benefits for 36
of 23 Part-year exclusion 27 Substantial presence test 2
Investment, treaty benefits for 37 Pay for personal services 21, 36
Partnership 22 Paying U.S. tax in foreign T
Pensions and annuities 22, 37 currency 7 Taiwan, American Institute in 25
Personal service, treaty benefits Payment of tax 4 Tax help 38
for 36 Penalties and interest 49 Tax home 16
Professional fees 23 Pensions and annuities: Tax treaties:
Professors, treaty benefits for 36 Income from 22, 37 Benefits of 36, 37
Railroad retirement benefits 46 Withholding from 12 Competent authority assistance 37
Reimbursement of employee Physical presence test Determining residence 18
expenses 23 12-month period 20 Obtaining copies of 37
Reimbursement of moving Defined 19 Purpose of 36
expenses 23 Maximum exclusion 27 Teachers, treaty benefits for 36
Rental 23 Meeting the requirements 44 Temporary assignment,
Royalties 23 Waiver of time requirements 20 expenses 16
Social security benefits 46 Professors, treaty benefits for 36 Totalization agreements 13
Sole proprietorship 22 Publications (See Tax help) Trainees, treaty benefits for 36
Source of 22 Puerto Rico: Travel restrictions 21
Stock options 22 Residents of 18 Treaties (See Tax treaties)
Students, treaty benefits for 36 Territory exclusion
Teachers, treaty benefits for 36 U
Trainees, treaty benefits for 36 Q U.S. Government employees 24, 25
Unearned 22
Questions and answers 43-49 U.S. Virgin Islands:
Indefinite assignment 16
Residents of 18
Individual retirement arrangements R
(IRAs) 33 Territory exclusion 18
Investment income, treaty benefits Railroad retirement benefits 46
for 37 Reimbursement: V
Accountable plan 23 Virgin Islands:
L Employee expenses 23 Nonresidents of 8
Limit on Moving expenses 23 Residents of 8
Foreign housing deduction 30 Resident alien defined 2 Where to file 8
Housing expenses 29 Revoking choice to exclude 28
Income exclusion 26, 27
W
Lodging, exclusion of 25
S Waiver of time requirements 20
Scholarship and fellowship When to file and pay 4, 43
M grants 48 Where to file:
Married couples 31 Scholarships 23 Claiming exclusion/deduction 8
Meals and lodging, exclusion of 25 Second foreign household 29, 31 Commonwealth of the Northern
Moving: Self-employment tax: Mariana Islands residents 9
Reimbursement of expenses 23 Clergy 14 Guam residents 8
Exemption from 14 No legal residence in U.S. 8
N How to pay 47 Virgin Islands residents,
Who must pay 14 nonresidents 8
Nonresident spouse
Social security and Medicare Withholding:
Social security number 9 taxes 12 Income tax 11, 47
Treated as resident 9 Social security benefits 46 Pension payments 12
Northern Mariana Islands:
Residents of 9

Publication 54 (2023) 51