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Case Study 2: Sources of Earned IncomeRon and his wife Amy, both U.S. citizens, have lived in England for two years. Ron is in the military and Amy works in a pastry shop in a nearby town. Ron's military income does not qualify for the foreign earned income exclusion but Amy's wages from the company in England does qualify. The source of Amy's income is England. Click here for an explanation. To qualify for the exclusion, services must be performed in a foreign country. Where the payments come from for the service or where they are deposited is not a factor in determining the source of the income. If a taxpayer works predominantly in a foreign country, but does some work in the U.S., an adjustment must be made to the total of foreign earned income. |
