FEIE is a vital acronym for the US expatriate or Perpetual Traveler! For 2013, the Foreign Earned Income Exclusion is up to US$97,600. That's right, no US income tax on your first $97,600 of earned income if you reside outside the US.
It does not matter if the earnings come from your US employer or a company abroad. If you live outside the US for at least 330 days per year, or have legal residency in a foreign country (e.g. an expat residing in a foreign country on an employment visa), a lot of your earnings are protected from the clutches of the IRS.
If you are lucky enough to live in a country without income taxes, or you are a PT residing here-a-bit, there-a-bit, outside taxation obligations, you can be free of onerous income taxes entirely. If you reside where your foreign income is taxed, what you pay there may be credited to what you owe IRS if your income goes over the exclusion maximum.
FEIE only applies to earned income! So interest, dividends, rental income, and other forms of unearned income remain subject to US taxes.
No exemption from filing! Do be careful to file all your proper tax and other financial forms on time if you are a US citizen, legal permanent resident, or other "US person" subject to IRS reporting requirements. IRS is quietly - but as deadly as a krait in the bamboo - going after expats. Hey, the US is broke, so Taxman is as greedy as ever, just more desperate for your dollars (yen, rupees, Euros, and everything else).
Tax-time is always stress-time. But FEIE can seriously reduce your pain.
May your road rise to meet you!
Ann
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