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Syl Michelin of Thun Financial – Best Places In The World To Retire User Account
The Foreign Earned Income Exclusion has been increased to $102,100 for 2017, so a married couple filing jointly can deduct up to $204,200. 
 
The excluded amount cannot exceed your earned income for that year, so if you earn $50,000, that is the maximum you are able to deduct. Also, the amount is not "portable" between husband and wife, even filing jointly. So if one spouse makes $500,000 and the other one makes $50,000, they will only be able to deduct $152,100 in 2017 (full exclusion for the highest earner, capped exclusion of $50,000 for the lower earner).  
Terry Bradford of Origen Real Estate Panama – Best Places In The World To Retire User Account
The Foreign Earned Income Exclusion has to do with how much of your income you can exclude from your taxable income on your US income tax return. This only applies on active income that is earned outside of the US. Income from investments is not included.
 
We checked how the Foreign Earned Income Exclusion worked before we moved to Panama and we found out that a husband and wife who still intend to work here should file separate income tax returns because the US wants to know how much you are making outside the country and I believe that started 1998. The reason to file separately is because each spouse is allotted to make so much money in a foreign country that each can exclude from their US income taxes.  For example, when we started this it was back in 2008.  Back then, a husband could make US $87,600 per year and a wife could make $87,600 per year that they could exclude from taxable income on their US income tax.  The amount able to be excluded progressed up all the way to the year 2014 taxable year where a husband could make up to $99,200 in a foreign country and it is excluded, and a wife could make up to $99,200 per year as well.
 
If you are a resident and you can prove that you are living in Panama for 330 days per year out of 360 days, then you can use the waiver form to claim the exclusion. There is a special form at the Internal Revenue Service and your accountant here in Panama and your accountant back in the US should use.
 
I am not a tax accountant or an attorney. This is just a broad understanding and also, since laws in the US change overnight, I very much highly recommend everyone who plans to live in Panama to check this matter with a qualified professional both in the US and here in Panama.
David Smith of Farmland Assets – Best Places In The World To Retire User Account
I am not an accountant, but know from personal experience that, as Americans, if your income comes from a place other than the United States, we can use the Foreign Earned Income Exclusion in order to exclude income on our income tax up to a certain level.  For me, for example, I live in Nicaragua and I don’t generate income from the United States, so I don’t have to pay income tax on the excluded amount.
 
As Americans we do, however, still have to file our income tax, regardless of how much money we make.
 
The Foreign Earned Income Exclusion is only for active income.  If you’re living outside the US and generate income from buying and selling stocks, for example, you’re going to still pay income tax on that part.
 
My understanding is that, for some states such as California, you can file as a non-resident and be eligible for an exclusion from state income taxes as well. Some states allow the exclusion, and some states don’t, so you need to check the law in your particular state. 
Tabitha Paddock of Greenback Expat Tax Services – Best Places In The World To Retire User Account
The Foreign Earned Income Exclusion (FEIE) is a great tool that can be used to limit (or even eliminate) dual taxation while living abroad.  With the FEIE, qualified expats can exclude over $97,000 (for 2013 tax year) of earned income from being taxed in the US!
 
In order the qualify for the FEIE you must pass one of two tests; either the Bona Fide Resident Test (live fully in the country and have no intentions of returning to the US) or the Physical Presence Test (living abroad for over 330 days in any 365 day period).
 
If you pass one of these tests, you can then exclude up to $97,600 from being taxed in the US (up to $195,200 for Married couples filing Jointly). Just fill out Form 2555 and attach it to your US Federal return.
 
Unfortunately, foreign income from sources such as dividends, interest and rental income are not included since this income is not “earned” in the IRS’s view. In addition, US based income from things such as pensions will not qualify for this exclusion because it was not earned inside a foreign country.

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