For American taxpayers that reside overseas, the first $80,000 dollars of foreign earned income is not taxable. That is the $80,000 after you take all of your deductions, etc.. If your bottom line income is $100,000, then you only pay taxes on $20,000 with the associated tax bracket.
As far as what constitutes residing overseas, the IRS has two criteria:
1. 330 days out of the country.
2. Bona fide residency. This is basically a common sense test as to whether you truly reside overseas. It looks at car ownership, drivers licenses, and other stuff that would usually indicate where you live. Once you establish residency, the 330 days doesn't exactly apply though if you spent a whole lot of days in the States, they might decide you no longer reside overseas.
When I moved overseas, I established my residency using the 330 days and then remained qualified under the bona fide residency.
As a side note, even if you are a resident overseas, you are subject to U.S. taxes for 100% of your capital gains.
As far as what constitutes residing overseas, the IRS has two criteria:
1. 330 days out of the country.
2. Bona fide residency. This is basically a common sense test as to whether you truly reside overseas. It looks at car ownership, drivers licenses, and other stuff that would usually indicate where you live. Once you establish residency, the 330 days doesn't exactly apply though if you spent a whole lot of days in the States, they might decide you no longer reside overseas.
When I moved overseas, I established my residency using the 330 days and then remained qualified under the bona fide residency.
As a side note, even if you are a resident overseas, you are subject to U.S. taxes for 100% of your capital gains.
