Department of the Treasury

Internal Revenue Service

Publication 593

(Rev. Nov. 96)

Cat. No. 46595Q

Tax Highlights 

for U.S.

Citizens 

and Residents

Going Abroad
Important Change

Individual Taxpayer Identification Number (ITIN)

The IRS will issue you an ITIN if you are a nonresident or

resident alien who does not have and is not eligible to get

a social security number (SSN). To apply for an ITIN, file

Form W–7 with the IRS. It usually takes about 30 days to

get an ITIN. Enter the ITIN wherever an SSN is requested on a tax return. If you are required to include another person’s SSN on your return and that person does

not have and cannot get an SSN, enter that person’s

ITIN.

Caution. An ITIN is for tax use only. It does not entitle

you to social security benefits or change your employment or immigration status under U.S. law.

Important Reminders

Form 2555–EZ. You may be able to file the simpler

Form 2555–EZ, Foreign Earned Income Exclusion, if,

among other requirements:

● You had foreign earned income of only wages and

salaries of $70,000 or less,

● Your return is not for a short year, and

● You did not have business or moving expenses.

Form 2555–EZ has fewer lines than Form 2555.

Required tax return. In determining whether you must

file an income tax return, include in income any excludable foreign earned income or foreign housing amount. If

you must file a return and all or part of your income is excluded under these rules, you must also file Form 2555

or, if you qualify, Form 2555–EZ.

Foreign income tax withheld. If a foreign employer

withheld income taxes from your pay and paid those

taxes to the foreign country’s tax authority (not the U.S.

Treasury), you cannot claim those taxes on your U.S. income tax return as federal income tax withholding. This

applies even if the withholding is reported on your Form

W–2, Wage and Tax Statement.

You may be able to claim a foreign tax credit on Form

1116, Foreign Tax Credit (Individual, Estate, Trust, or

Nonresident Alien Individual), based on the amount withheld and paid to the foreign tax authority. See Foreign Income Taxes, later.

Change of address. You may not automatically receive

forms during your first year abroad because of your

change of address. If your mailing address changes, be

sure to notify the Internal Revenue Service using Form

8822, Change of Address.

Introduction

This publication discusses in general terms some provisions of the U.S. federal income tax law that apply to U.S.

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citizens and resident aliens who live or work abroad and

who expect to receive income from foreign sources.

As a U.S. citizen or resident alien, your worldwide income generally is subject to U.S. income tax regardless

of where you are living. Also, you are subject to the same

income tax return filing requirements that apply to U.S.

citizens or residents living in the United States. However,

several income tax benefits might apply if you meet certain requirements while living abroad. You may be able to

exclude from your income a limited amount of your foreign earned income. You also may be able either to exclude or to deduct from gross income your housing

amount (defined later). To claim these benefits, you

must file a tax return and attach Form 2555, Foreign

Earned Income. If you are claiming the foreign earned income exclusion only, you may be able to use the shorter

Form 2555–EZ, Foreign Earned Income Exclusion,

rather than Form 2555.

You may, on your U.S. return, be able to claim a tax

credit or an itemized deduction for the foreign income

taxes that you pay. Also, under tax treaties or conventions that the United States has with many foreign countries, you may be able to reduce your foreign tax liability.

IRS Publications 54, Tax Guide for U.S. Citizens and

Resident Aliens Abroad, 514, Foreign Tax Credit for Individuals, and 901, U.S. Tax Treaties, discuss in detail the

treatment of your foreign income, the foreign tax credit,

and the general tax treaty benefits available to you.

Students or professors who receive income from

teaching or while studying abroad should also get Publication 520, Scholarships and Fellowships.

See How to Get More Information near the end of this

publication for information about getting publications and

forms.

Filing Information

The U.S. filing requirements for U.S. citizens and resident aliens in foreign countries are generally the same as

those for citizens and residents living in the United

States.

Who must file. Your age, marital status, gross income,

and whether you can be claimed as a dependent by another taxpayer determine whether you must file a U.S.

federal income tax return. To determine if you meet the

gross income requirement for filing purposes, you must

include all income you receive from foreign sources as

well as your U.S. income. It does not matter that:

● The income is paid in foreign money, or

● The foreign country imposes an income tax on that income, or

● The income is excludable under the foreign earned income exclusion, discussed later.

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Self-employed persons. You must file a U.S. income tax return if you had $400 or more of net earnings

from self-employment, regardless of your age. You must

pay self-employment tax on your self-employment

income even if it is excludable as foreign earned income in figuring your income tax. Net earnings from

self-employment include the income earned both in a

foreign country and in the United States.

When to file. If your tax year is the calendar year, the

due date for filing your income tax return is usually April

15 of the following year.

Extensions of time to file. If you are a U.S. citizen

or resident and both your tax home and your abode are

outside the United States and Puerto Rico on the regular

due date of your return, you are automatically granted an

extension to June 15 to file your return and pay any tax

due. You do not have to file a special form to receive this

extension. You must, however, attach a statement to

your tax return when you file it showing that you are eligible for this automatic extension.

It may benefit you to file for an additional extension of

time to file. You may benefit if, on the due date for filing,

you have not yet met either the bona fide residence test

or the physical presence test, but you expect to qualify

after the automatic extension discussed above and have

no tax liability. To file for an additional extension, send

Form 2350, Application for Extension of Time To File

U.S. Individual Income Tax Return, to the Internal Revenue Service Center in Philadelphia or to your local IRS

representative. Send the form after the close of your tax

year but before the end of the first extension. If an extension is granted, it will be to a date after you expect to

meet the time requirements for the bona fide residence

or physical presence test. You must attach the approved

Form 2350 to your income tax return when you file it.

Where to file. If any of the following situations apply to

you, you should file your return with the Internal Revenue

Service Center, Philadelphia, PA 19255-0002.

1) You claim the foreign earned income exclusion.

2) You claim the foreign housing exclusion or

deduction.

3) You claim the exclusion of income for bona fide residents of American Samoa.

4) You live in a foreign country or U.S. possession and

have no legal residence or principal place of business in the United States.

All other taxpayers should see Publication 54 or the

instructions for Form 1040.

Foreign bank and financial accounts. If you had any financial interest in, or signature or other authority over, a

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bank account, securities account, or other financial account in a foreign country at any time during the tax year,

you may have to complete Treasury Department Form

TD F 90–22.1, Report of Foreign Bank and Financial Accounts, and file it with the Department of the Treasury,

P.O. Box 32621, Detroit, MI 48232. You need not file this

form if the combined assets in the account(s) are

$10,000 or less during the entire year, or if the assets are

with a U.S. military banking facility operated by a U.S. financial institution.

You can get Form TD If 90–22.1 from the offices

listed at the end of this publication or from the IRS Forms

Distribution Center, P.O. Box 25866, Richmond, VA

23286-8107.

Estate and gift taxes. Under certain conditions, you

may have to file a federal estate or gift tax return.

Gift tax return. If you make a transfer by gift during a

year, you may have to file Form 709, United States Gift

(and Generation-Skipping Transfer) Tax Return, or Form

709-A, United States Short Form Gift Tax Return, for that

year. You generally do not have to file a return if your

gifts during the year were not more than $10,000 to any

one person, the transfers were for educational or medical expenses, or the transfer is to your spouse and it

qualifies for the unlimited marital deduction.

Estate tax return. The estate’s executor or administrator must, in general, file Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return, for

any estate with a gross value (plus adjusted taxable gifts

and specific gift tax exemption for gifts made by the deceased person) of more than $600,000.

More information. For details, write to:

Internal Revenue Service 

Assistant Commissioner (International) 

Estate Tax Group 

CP:IN:C:E:655 

950 L’Enfant Plaza South, S.W. 

Washington, DC 20024

Income Earned Abroad

You may qualify for an exclusion from tax of up to

$70,000 in income earned while working abroad. However, you must file a tax return to claim it. In general, foreign earned income is income received for services you

perform in a foreign country. You also may be able to

claim an exclusion or a deduction from gross income for

your reasonable housing costs that are over a certain

base amount. Generally, you will qualify for these benefits if your tax home (defined below) is in a foreign

country, or countries, throughout your period of bona

fide foreign residence or physical presence and you are

one of the following:

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1) A U.S. citizen who is a bona fide resident of a foreign

country or countries for an uninterrupted period that

includes a complete tax year, or

2) A U.S. resident alien who is a citizen or national of a

country with which the United States has an income

tax treaty in effect and who is a bona fide resident of

a foreign country or countries for an uninterrupted

period that includes an entire tax year, or

3) A U.S. citizen or a U.S. resident alien who is physically present in a foreign country or countries for at

least 330 full days during any period of 12 consecutive months.

Tax home. Your tax home is the general area of your

main place of business, employment, or post of duty

where you are permanently or indefinitely engaged to

work. You are not considered to have a tax home in a foreign country for any period during which your abode (the

place where you regularly live) is in the United States.

However, being temporarily present in the United States

or maintaining a dwelling there does not necessarily

mean that your abode is in the United States. For details,

see Publication 54.

Foreign country. A foreign country, for this purpose,

means any territory under the sovereignty of a government other than that of the United States, including territorial waters (determined under U.S. laws) and air space.

A foreign country also includes the seabed and subsoil of

those submarine areas adjacent to the territorial waters

of the foreign country and over which it has exclusive

rights under international law to explore and exploit natural resources. For this purpose, U.S. possessions or territories are not foreign countries.

Waiver of time requirements. You may not have to

meet the minimum time requirements for bona fide residence or physical presence if you have to leave the foreign country because war, civil unrest, or similar adverse

conditions in the country prevented you from conducting

normal business. You must, however, be able to show

that you reasonably could have expected to meet the

minimum time requirements if the adverse conditions

had not occurred. See Publication 54 for a list of foreign

countries that individuals have had to leave due to these

conditions.

Travel restrictions. If you violate U.S. travel restrictions, you will not be treated as being a bona fide resident of, or physically present in, a foreign country for any

day during which you are present in a country in violation

of the restrictions. (These restrictions generally prohibit

U.S. citizens and residents from engaging in transactions

related to travel to, from, or within certain countries.)

Also, income that you earn from sources within such a

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country for services performed during a period of travel

restrictions does not qualify as foreign earned income,

and housing expenses that you incur within that country

(or outside that country for housing your spouse or dependents) while you are present in that country in violation of travel restrictions cannot be included in figuring

your foreign housing amount.

Currently, these travel restrictions apply to Cuba,

Libya, and Iraq.

Exclusion of foreign earned income. If your tax home

is in a foreign country and you meet either the bona fide

residence test or the physical presence test, you can

choose to exclude from gross income a limited amount

of your foreign earned income. Your income must be for

services performed in a foreign country during your period of foreign residence or presence, whichever applies.

You cannot, however, exclude the pay you receive as an

employee of the U.S. Government or its agencies. You

cannot exclude pay you receive for services performed

abroad for Armed Forces exchanges, officers’ messes,

etc., operated by the U.S. Army, Navy, or Air Force.

Credits and deductions. If you claim the exclusion,

you cannot claim any credits or deductions that are related to the excluded income. Thus, you cannot claim a

foreign tax credit or deduction for any foreign income tax

paid on the excluded income. Nor can you claim the

earned income credit if you claim the exclusion. Also, for

IRA purposes, the excluded income is not considered

compensation and, for figuring deductible contributions

when you are covered by an employer retirement plan,

the excluded income is included in your modified adjusted gross income.

Amount excludable. If your tax home is in a foreign

country and you qualify under either the bona fide residence test or physical presence test for the entire tax

year, you can exclude your foreign income earned during

the year up to $70,000. However, if you qualify under either test for only part of the year, you must reduce ratably

the $70,000 maximum based on the number of days

within the tax year you qualified under one of the two

tests.

Housing amount. If your tax home is in a foreign country and you meet either the bona fide residence test or

the physical presence test, you may be able to claim an

exclusion or a deduction from gross income for a housing amount.

A housing amount is the excess, if any, of your allowable housing expenses for the tax year over a base

amount. Allowable housing expenses are the reasonable expenses (such as rent, utilities other than telephone

charges, and real and personal property insurance) paid

or incurred during the tax year by you, or on your behalf,

for your foreign housing and that of your spouse and dependents if they lived with you. You can include the

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rental value of housing provided by your employer in return for your services. You can also include the allowable

housing expenses of a second foreign household for

your spouse and dependents if they did not live with you

because of dangerous, unhealthy, or otherwise adverse

living conditions at your tax home. Housing expenses, for

this purpose, do not include the cost of home purchase

or other capital items, wages of domestic servants, or

deductible interest and taxes.

The base amount is 16% of the annual salary of a

GS-14, step 1, U.S. Government employee, figured on a

daily basis, times the number of days during the year that

you meet the bona fide residence test or the physical

presence test. The annual salary is determined on January 1 of the year in which your tax year begins. You figure

the base amount on Form 2555.

Exclusion. You can exclude your housing amount

from income to the extent it is considered paid for with

employer-provided amounts. Employer-provided

amounts are any amounts paid to or for you by your employer, including your salary, housing reimbursements,

and the fair market value of pay given in the form of

goods and services.

If you claim the exclusion, you cannot claim any credits or deductions related to excluded income, including a

credit or deduction for any foreign income tax paid on the

excluded income.

Deduction. If you are self-employed and your housing amount is not provided by or for an employer, you can

deduct it in arriving at your adjusted gross income. However, the deduction is limited to the amount your foreign

earned income for the tax year is more than the excluded

foreign earned income and housing amount.

Carryover. If you cannot deduct all of your housing

amount in a tax year because of the limit, you can carry

over the unused part to the next year. You can deduct

this carryover to the extent the limit for that year (your

foreign earned income minus the foreign earned income

and housing amount you exclude) is more than your

housing deduction for that year. You cannot carry over

any remaining amount to any future tax year.

Choosing the exclusion(s). You make separate

choices to exclude foreign earned income and/or to exclude or deduct your foreign housing amount. If you

choose to take both the foreign housing exclusion and

the foreign earned income exclusion, you must figure

your foreign housing exclusion first. Your foreign earned

income exclusion is then limited to the smaller of (a) your

annual exclusion limit or (b) the excess of your foreign

earned income over your foreign housing exclusion.

Once you choose to exclude your foreign earned income or housing amount, that choice remains in effect

for that year and all future years unless you revoke it. You

can revoke your choice for any tax year. However, if you

revoke your choice for a tax year, you cannot claim the

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exclusion again for your next 5 tax years without the approval of the IRS. For more information on revoking the

exclusion, see Publication 54.

Exclusion of for information meals and lodging. If as

a condition of employment you are required to live in a

camp in a foreign country that is provided by or for your

employer, you can exclude the value of any meals and

lodging furnished to you, your spouse, and your dependents. For this exclusion, a camp is lodging that is:

1) Provided for your employer’s convenience because

the place where you work is in a remote area where

satisfactory housing is not available to you on the

open market within a reasonable commuting

distance,

2) Located as close as practicable in the area where

you work, and

3) Provided in a common area or enclave that is not

available to the public for lodging or accommodations and that normally houses at least 10

employees.

Tax Withholding and Estimated

Tax

Generally, you must pay U.S. tax on the income earned

abroad in the same way you pay the tax on income

earned in the U.S. If you are an employee, your employer

probably withholds income tax from your pay. If income

tax is not withheld or if not enough tax is withheld, you

might have to pay estimated tax.

Withholding tax. You may be able to have your employer discontinue withholding income tax from all or a

part of your wages. You can do this if you expect to qualify for the income exclusions under either the bona fide

residence test or the physical presence test. See Publication 54 for information.

Withholding from pension payments. U.S. payers

of benefits from employer deferred compensation plans

(such as employer pension, annuity, or profit-sharing

plans), individual retirement plans, and commercial annuities generally must withhold income tax from the payments or distributions. Withholding will apply unless you

choose exemption from withholding. You cannot choose

exemption unless you provide the payer of the benefits

with a residence address in the United States or a U.S.

possession or unless you certify to the payer that you are

not a U.S. citizen or resident alien or someone who left

the United States to avoid tax.

For rules that apply to nonperiodic distributions from

qualified employer plans and tax-sheltered annuity plans

get Publication 575, Pension and Annuity Income (Including Simplified General Rule).

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Estimated tax. If you are working abroad for a foreign

employer, you may have to pay estimated tax, since not

all foreign employers withhold U.S. tax from your wages.

Your estimated tax is the total of your estimated income tax and self-employment tax for the year minus

your expected withholding for the year.

When you estimate your gross income, do not include

the income that you expect to exclude. You can subtract

from income your estimated housing deduction in figuring your estimated tax liability. However, if the actual exclusion or deduction is less than you expected, you may

be subject to a penalty on the underpayment.

Use Form 1040–ES, Estimated Tax for Individuals, to

estimate your tax. The requirements for filing and paying

estimated tax are generally the same as those you would

follow if you were in the United States.

Foreign Income Taxes

A limited amount of the foreign income tax you pay can

be credited against your U.S. tax liability or deducted in

figuring taxable income on your U.S. income tax return. It

is usually to your advantage to claim a credit for foreign

taxes rather than to deduct them. A credit reduces your

U.S. tax liability, and any excess can be carried back and

carried forward to other years. A deduction only reduces

your taxable income and can be taken only in the current

year. You must treat all foreign income taxes in the same

way. You generally cannot deduct some foreign income

taxes and take a credit for others.

Tax credit. If you choose to credit foreign taxes against

your tax liability, complete Form 1116, Foreign Tax

Credit, (Individual, Estate, Trust, or Nonresident Alien Individual), and attach it to your U.S. income tax return. Do

not include the foreign taxes paid or accrued as withheld

income taxes on line 52 of Form 1040.

Limit. Your credit cannot be more than the part of

your U.S. income tax liability allocable to your taxable income from sources outside the United States. So, if you

have no U.S. income tax liability, or if all your foreign income is exempt from U.S. tax, you will not be able to

claim a foreign tax credit.

If the foreign taxes you paid or incurred during the

year exceed the limit on your credit for the current year,

you can carry back the unused foreign taxes as credits to

2 prior tax years and then carry forward any remaining

unused foreign taxes to 5 later tax years.

Foreign taxes paid on excluded income. You cannot claim a credit for foreign taxes paid on amounts excluded from gross income under the foreign earned income exclusion or the housing amount exclusion,

discussed earlier.

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Deduction. If you choose to deduct all foreign income

taxes on your U.S. income tax return, itemize the deduction on Schedule A (Form 1040). You cannot deduct foreign taxes paid on income you exclude from your U.S. income tax return.

More information. The foreign tax credit and deduction, their limits, and the carryback and carryover provisions are discussed in detail in Publication 514, Foreign

Tax Credit for Individuals.

Tax Treaty Benefits

U.S. tax treaties or conventions with many foreign countries entitle U.S. residents to certain credits, deductions,

exemptions, and reduced foreign tax rates. In this way,

you may be able to pay less tax to those countries.

For example, most tax treaties allow U.S. residents to

exempt part or all of their income for personal services

from the treaty country’s income tax if they are in the

treaty country for a limited number of days.

Treaties also generally provide U.S. students, teachers, and trainees with special exemptions from the foreign treaty country’s income tax Publication 901, U.S.

Tax Treaties, contains detailed information on tax treaties and tells you where you can get copies of them.

How To Get More Information

You can get help from the IRS in several ways.

Outside of the United States. The IRS has combined

special forms and instructions as well as publications in

Publication 776, Overseas Filers of Form 1040 (Supplemental Package), for U.S. citizens and residents living

abroad. You can get the package and additional assistance by writing to:

Internal Revenue Service 

Assistant Commissioner (International) 

Attn: CP:IN:D:CS 

950 L’Enfant Plaza South, S.W. 

Washington, DC 20024

During the filing period, you can also get the necessary federal income tax forms and publications from U.S.

embassies and consulates.

You can also call your nearest U.S. embassy or consulate, or the IRS office numbers listed below, to find out

when and where assistance will be available. These IRS

telephone numbers include the country and city codes

required if you are outside the local dialing area. The

Nassau and Ottawa numbers include the U.S. area

codes.

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Bonn, Germany (49) (228) 339-2119

London, England (44) (171) 408-8077

Mexico City, Mexico (52) (5) 211-0042

Ext. 3557 or 3559

Nassau, Bahamas (800) 829–1040

or (809) 759–5100

Ottawa, Canada (613) 563-1834

Paris, France (33) (1) 4312-

2555

Rome, Italy (39) (6) 4674-

2560

Santiago, Chile (56) (2) 330–3424

Singapore (65) 476–9413

Sydney, Australia (61) (2) 9373-

9194

Tokyo, Japan (81) (3) 3224-

5466

Within the United States. To order free publications

and forms, call 1–800–TAX-FORM (1–800–829–3676)

between 7:30 a.m. and 5:30 p.m. weekdays. (In Alaska

and Hawaii, the hours are Pacific Standard Time; in Puerto Rico, the hours are Eastern Standard Time.) Your local library or post office also may have the items you

need.

For a list of free tax publications, order Publication

910, Guide to Free Tax Services. It also contains an index of tax free topics and related publications and describes other free tax information services available from

IRS, including tax education and assistance programs.

If you have access to a personal computer and a

modem, you can also get many forms and publications

electronically. They are available through IRIS, the Internal Revenue Information Services, on FedWorld, a government bulletin board. Iris is accessible directly by calling 703–321–8020. On the Internet, you can telnet to

iris.irs.ustreas.gov or, for file transfer protocol services,

connect to ftp.irs.ustreas.gov. If you are using the World

Wide Web, connect to http://www.irs.ustreas.gov.

Tax questions. You can call the IRS with your tax

questions. Check your telephone book for the local number, or you can call 1–800–829–1040.

TTY/TDD equipment. If you have access to TTY/

TDD equipment, you can call 1–800–829–4059 to ask tax

questions or to order forms and publications.

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