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Comment by oops | Hacker News Reader

On that IRS page it says:

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

It sounds like one must also be tax resident in the foreign country for this to work?

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That's right. The other piece of the puzzle is that you have to either show that you're a resident of a foreign country, or that you're physically outside of the USA for 330 days of the year. (as mentioned in the linked article)

The IRS page reads as though one must meet both those criteria, not just one of them?

You must either be a bona-fide resident for an uninterrupted period covering the whole tax year[0] or have been out of the US for at least 330 full days in the year[1] although in the latter case your presence in a foreign country must also be legal according to US law.

[0] http://www.irs.gov/Individuals/International-Taxpayers/Forei...

[1] http://www.irs.gov/Individuals/International-Taxpayers/Forei...

Yah, you have to be paying taxes to someone else to take the FEI deduction. Unless you are in a low tax country like Switzerland, Hong Kong, or Singapore, it's just a shortcut in doing your taxes, you don't actually save money since you can always deduct your foreign income taxes if you don't take it.

Kind of an aside, but it's sometimes not even worth doing the shortcut, again unless you're in a very low-tax country. I am eligible for the foreign earned income exclusion but purposely don't take it, and instead take the foreign tax credit, because excluded income is not eligible for IRA contributions [1]. It's entirely excluded, so doesn't count as earned income, and since you can't contribute more to an IRA than you have in earned income for the year, if you end up excluding all your income you have no basis for a contribution. But the foreign tax credit doesn't cause the same problem, because it's just a credit against tax owed, not an exclusion of income.

[1] http://www.irs.gov/Individuals/International-Taxpayers/Indiv...

I don't do FEIE either anymore. It was easy when I made under the limit, but over...is complicated and Chinese taxes are high enough that I still get to write in zero.

Yes. FEI is the IRS's bone to US citizens residing outside the US (in most countries, you only pay taxes if you're resident, citizen or not, the US is one of the few where you're taxed even when residing in an other country)

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