Does foreign income exclusion include capital gains?

The Foreign Earned Income Exclusion (FEIE, using IRS Form 2555) allows you to exclude a certain amount of your FOREIGN EARNED income from US tax. Other income, such as pensions, interest, dividends, capital gains, US-sourced income, etc., cannot be excluded with the FEIE.

Does foreign tax credit apply to capital gains?

The Foreign Tax Credit is a dollar for dollar reduction in your US taxes using taxes paid to a foreign country on the same income. However, capital gains cannot be offset using the Foreign Earned Income Exclusion, as the gains are not considered “earned” income, which is a requirement to utilize this exclusion.

Which type of income can be excluded using the foreign earned income exclusion?

However, you may qualify to exclude your foreign earnings from income up to an amount that is adjusted annually for inflation ($105,900 for 2019, $107,600 for 2020, $108,700 for 2021, and $112,000 for 2022). In addition, you can exclude or deduct certain foreign housing amounts.

Is foreign earned income subject to capital gain tax rates?

Nonresident aliens are subject to no U.S. capital gains tax, but capital gains taxes will likely be paid in your country of origin. If you are a resident alien and hold a green card—or satisfy resident rules—you are subject to the same tax rules as a U.S. citizen.

What is a capital gains exclusion?

If you have a capital gain from the sale of your main home, you may qualify to exclude up to $250,000 of that gain from your income, or up to $500,000 of that gain if you file a joint return with your spouse. 409 covers general capital gain and loss information.

How do I claim capital gains exclusion?

To qualify for the exclusion, you must have used the home you sell as your principal residence for at least two of the five years prior to the sale. Your principal residence is the place where you (and your spouse if you’re filing jointly and claiming the $500,000 exclusion for couples) live.

What is foreign capital gains?

This is called foreign resident capital gains withholding. You can claim it back when you lodge your Australian tax return. Foreign residents and temporary residents pay capital gains tax (CGT) only on taxable Australian property. They cannot claim some CGT discounts and exemptions.

Can you take a partial foreign earned income exclusion?

Who qualifies for the Foreign Earned Income Exclusion? The foreign income tax exclusion applies to those who have lived abroad for a certain period of time within the tax year. However, partial-year exclusions are available if you’ve recently moved to a foreign country or returned to the U.S. mid-year.

What is considered foreign income for tax purposes?

For this purpose, foreign earned income is income you receive for services you perform in a foreign country in a period during which your tax home is in a foreign country and you meet either the bona fide residence test or the physical presence test.

What is considered foreign source income?

Income is considered foreign-source if the location of the activity for which the payment is being issued is outside the U.S. A clear indication of the location of the activity is necessary on all supporting documentation for the payment to be correctly classified. This applies to both service and non-service income.

Do expats pay capital gains tax in the US?

Expats should note that US capital gains tax applies to capital gains on worldwide assets and investments, irrespective of whether the sale is subject to foreign capital gains tax too or not (though if so this can normally be offset – keep reading for details). How to calculate capital gains tax

Who is subject to capital gains tax as a foreign citizen?

The Taxation of Capital Gains of Nonresident Alien Students, Scholars and Employees of Foreign Governments. The capital gains income of: and employees of foreign governments and international organizations may be taxed in a different way than the capital gains income of other nonresident aliens.

What is the US foreign tax credit for expats?

Expats who pay capital gains tax in another country can normally claim the IRS Foreign Tax Credit when they file their US tax return, which allows them to claim a $1 US tax credit for every dollar of tax they’ve paid in another country.

Do you qualify for the foreign earned income exclusion?

If you meet certain requirements, you may qualify for the foreign earned income exclusion, the foreign housing exclusion, and/or the foreign housing deduction. To claim these benefits, you must have foreign earned income, your tax home must be in a foreign country, and you must be one of the following: