How to calculate foreign earned income

Forum|Forum|1 year ago
February 2, 2025
1 reply
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Do I add up my foreign income before or after foreign taxes?

pk12_2

Employee

@tracywormwood

(a) which country ?

(b) when did you enter that country and are you still there ? If not when did you leave that country?

You need to report Gross foreign income ( did you get a statement of earnings from your employer ?). Any income taxes on any unexcluded income ( FEIE remnant ) is eligible for foreign tax credit.

Please answer my questions -- there may be US-That Country tax treaty implications.

I will circle back once I hear from you

tracywormwoodAuthor

Thanks. I live in Sweden now, I still live here. I received my first pay in August of 2024. I have payslips from each month. I'm employed by a swedish company. They have a US office, but I am employed by the swedish entity (the company started in Sweden).

pk12_2

Employee

@tracywormwood ,

(a) Your foreign source income ( for US purposes ) is the gross amount ( equivalent to what would appear on Box 1 a W-2 ) -- this is before any tax/ withholdings . I am assuming here that your employer provides you with your gross pay and also the taxes withheld on that income.

(b) Note that for you to be able to exclude your Foreign Earned Income ( FEIE ), you would need a full 12 month test period of residence in Sweden -- for Physical Presence you need to be out of US for 330 days in any 12 month test period. -- form 2555.

So tell me when did you arrive in Sweden ? What I am looking for is the first full day -- that is when you have established a foreign tax home.. Thus for example your first full day was July 2nd ( having arrived on the morning of July1st. ) 2024, then your earliest test period is 07/02/2024 to 07/01/2025. So you would file your return after having met the Physical Presence Test and be able to exclude all foreign earnings for 2024 post establishment of the tax home.

Is there more I can do for you ?