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To claim the foreign earned income exclusion, the foreign housing exclusion, or the foreign housing deduction, you must have foreign earned income, your tax home must be in a foreign country, and you must be one of the following:
The maximum amount of the Foreign Earned Income Exclusion under Internal Revenue Code (IRC) section 911 is now indexed to inflation ($91,400 for 2009, $91,500 for 2010, $92,900 for 2011, $95,100 for 2012). In addition, Section 515 of the Tax Increase Prevention and Reconciliation Act of 2005 (P.L. 109-222) amends the computation of the Maximum Housing Amount Exclusion under IRC section 911. (Refer to Notice 2010-27)
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thank you. And what form do i have to fill up for that?
Hello I am a different expert.
If you are a U.S. Government employee paid by a U.S. agency to perform services in a foreign country, your pay is from the U.S. Government and does not qualify for the exclusions or the deduction. This is true even if the U.S. agency is reimbursed by the foreign government.
Certain taxpayers can exclude or deduct income earned in foreign countries. However, the foreign earned income and housing exclusions and the foreign housing deduction do not apply to the income you receive as an employee of the U.S. Government.
Now if you are not an employee and you do not receive a W2 form the US government or any agency and you are an independent contractor then all the info the other expert told you is true. BUT, if you are an employee of the US government you are not allowed the exclusion.
This is not new and you can find this information in IRS 516
Its is listed under the heading Foreign Income.
Most payments received by U.S. Government civilian employees for working abroad, including pay differentials, are taxable. However, certain foreign areas allowances, cost of living allowances, and travel allowances are tax free. Pay differentials you receive as financial incentives for employment abroad are taxable. Certain foreign areas allowances are tax free. Your employer should not have included these allowances as wages on your Form W-2.