While living outside of the United States as a citizen or green card holder, you are still required to pay U.S. income taxes on your worldwide income.
To ensure that you’re not subject to double taxation on this income, the U.S. government has tax treaties with many countries around the globe. These treaties also allow certain income to receive special treatment, such as reduced tax rates. If you meet certain requirements, you can opt to file Form 2555, Foreign Earned Income Exclusion, with your U.S. income tax return. The foreign earned income exclusion allows you to exclude up to $100,800 of foreign income for 2015, and an additional $100,800 if you are married and your significant other also earns income abroad (while still meeting the qualifying requirements).
These exclusions can only be claimed by filing a U.S. income tax return and are not automatic if you do not file. By filing your U.S. income tax return yearly you are also ensuring that the statue of limitations remains in effect, protecting yourself from the Internal Revenue Service examining tax returns older than three years. You may also be eligible to claim an additional exclusion/deduction for your foreign housing expenses.
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