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Wallstreet Esq.
Wallstreet Esq., Tax Attorney
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We will receive about US$ 20,000 from rental income from Brazil

Customer Question

We will receive about US$ 20,000 from rental income from Brazil in 2013. Is there a Income Exemption for foreign earned income? There will be no tax paid on these funds in Brazil.
If there are no exemptions, how do we report this income?
Submitted: 1 year ago.
Category: Tax
Expert:  Lev replied 1 year ago.

LEV :

Hi and welcome to Just Answer!
Foreign earned income exclusion is applied to income earned as wages or self-employment income - rental income is not considered as earned income for that purpose.
If you are US citizens or resident aliens - you are required to report all your worldwide income regardless if it is earned in the US or abroad and regardless if that income is taxable abroad or not.
Rental income is reported on schedule E - www.irs.gov/pub/irs-pdf/f1040se.pdf‎
You also may deduct qualified rental expenses - and calculate net income from rental activity which will be transferred to form 1040 line 17 and added to your other taxable income.

Customer :

Would monies received form sales of products shipped from the USA to Brazil qualify for the foreign earned income

Customer :

exclusion? What is the limit for foreign earned income exclusion?

LEV :

If that is your self-employment activity - sales of products - then - yes - that income is considered as earned income and does qualify for foreign earned income exclusion.
To qualify - you need to be in a foreign country at least 330 days during any 12 month period or be a bona fide resident of a foreign country.

Customer :

What is the limit on Foreign earned income exclusion? Would income received in Brazil for products shipped from the USA qualify as Foreign Earned Income Exclusion?

LEV :

or the person to qualify for the foreign earned income exclusion - he/she should:
-- Work and reside outside the United States for at least 330 days during the year(Physical Presence test), or
-- Meet either the Bona Fide test.
If the person qualifies - the amount of foreign earned income exclusion fro 2012 is $95,100.

Exclusion is not granted - to receive that exclusion - the taxpayer should file the tax return and attach the form 2555.

Please be aware that - the exclusion above will not affect self-employment taxes - only income taxes. Only earned income is excludable - income from wages and self-employment. For instance - dividends, investment income, rental income, pensions, etc - are not excludable.

Customer :

Lev left the chat and did not reply to my last question.

LEV :

If you qualify for the foreign earned income exclusion and sell products from Brazil as your self-employment activity - you income from that activity does qualify for the foreign earned income exclusion.

LEV :

I did not left the chat and did reply above.
Let me know if you are not able to see my reply.

LEV :

Please reply if you can see my post. Otherwise - I will switch to Q&A mode.

Expert:  Lev replied 1 year ago.
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