In order to avoid double taxation, U.S. expats are generally entitled to several benefits related to the income they earn while overseas and the taxes they pay to foreign countries:

Foreign Earned Income Exclusion – Each year, U.S. expats are allowed to exclude from their income a fixed amount of their foreign earnings. For 2015, this amount is $100,800 per qualifying person. In order to claim this benefit you must meet certain criteria and attach Form 2555 to your return. In order to qualify for this exclusion, you must meet the following criteria: Bona fide residence test – you must be a bona fide resident of a foreign country for the entire year; or Physical presence test – you are present in a foreign country or countries for at least 330 full days during any period of 12 consecutive months.

Foreign Housing Exclusion/Deduction – While living overseas, you may be able to exclude or deduct certain amounts equal to the amounts you paid for your housing expenses. Housing expenses generally include rent, utilities, repairs and parking. Whether you can take an exclusion or deduction depends on whether you’re a salaried employee or self-employed. To claim an exclusion/deduction, you must attach Form 2555 to your return. 

Foreign Tax Credits – The foreign tax credit rules allow U.S. expats to reduce their U.S. federal income tax liability on a dollar-for-dollar basis based on the taxes paid on such income to a foreign jurisdiction. Note that U.S. expats will be entitled to a credit only with respect to foreign income taxes paid and not for other types of taxes. In addition, the credit can be used only to offset foreign source income (and not amounts earned in the U.S.). To claim the credit, you must attach Form 1116 to your tax return.

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