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Yes, thats right. This is because, technically speaking, you establish Iraq as your 'tax home', i.e. a official place of employment. I will not elaborate here to create confusion, but YES, you can exclude up to USD 91,500 and they are exempt, which is best explained at http://taxplannercpa.com/WP/foreign-earned-income-exclusion/basics-of-the-foreign-earned-income-exclusion/
I am sure this would help...
No.. as I said, it will still remain exempt. Refer in detail to the link provided.. It WILL BE EXEMPT.
Hope this helps...