Foreign Earned Income Exclusion - What's Excluded Exactly?

The Foreign Earned Income Exclusion for 2019 maximum amount is $105,900; an increase from 2018 of $103,900. What does this mean exactly? Wages earned by a U.S citizen who lives abroad can exclude up to $105,900 of their income from federal taxes according to the IRS. Sounds like good news, right?

Let's talk specifics. If you earn wages (as in W-2 income) then this applies to that income. This exclusion doesn't apply to self employment income. If you are a self employed person or have pass through income, you are subject to paying self employment tax.

There are ways to structure your business to position you and your business in a way that best optimizes your tax position. If you would like more information on that, please feel free to reach out!