The Foreign Earned Income Exclusion has to
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.