Does Your Foreign Income Qualify for the Earned Income Tax Credit (EIC)?

Expat Income Tax FEIE

Since 1975, the Earned Income Tax Credit (EIC or EITC) has been helping US taxpayers reduce the amount of federal taxes they owe. But the IRS believes that many taxpayers fail to take advantage of the EIC each year, even though they qualify. This includes Americans who earn foreign income or live abroad for part of the year. Find out how you can qualify for the Earned Income Tax Credit if you earn foreign income or live abroad part-time.

What Is the Earned Income Tax Credit?

The EIC is a tax credit that helps low to moderate-income taxpayers save on their US taxes. Based on your income and the number of qualifying children in your household, the credit ranges from $529 to $6,557 for 2019 ($538 to $6,660 for 2020). Some married couples and single people without children do qualify for the EIC.

It is worth your time to review your eligibility every year. Sometimes a change in your situation – such as starting a new job, getting married, or having a child – will mean that you are eligible for the EIC when you did not qualify in prior years.

Do I Qualify for the EIC?

Eligibility for the EIC is fairly straightforward:

  • You must have earned income during the tax year in question.
  • You cannot claim the EIC if your status is married filing separately.
  • You, your spouse, and any qualifying children must all have valid Social Security Numbers.
  • Your 2019 investment income must be $3,650 or less.
  • To claim the EIC on your U.S. tax return, your home (and your spouse’s if filing a joint return) must have been in the United States for more than half the year. If you have a child, the
    child must have lived with you in the United States for more than half the year. (Special
    rules apply to military personnel stationed outside the United States.)
  • You earned income and adjusted gross income must be no more than:
Filing Status Qualifying Children Claimed
0 1 2 3+
Single, Head of Household or Qualifying Widow(er) $15,820 $41,756 $47,440 $50,954
Married Filing Jointly $21,710 $47,646 $53,330 $56,844

There are special rules for members of the military serving in combat zones. These individuals may choose to include their nontaxable combat pay as income in order to qualify for the EIC.

Unsure if you qualify? Try using the EITC Assistant on the IRS website. With a few simple questions, this helpful tool can not only tell you if you qualify, it can help you estimate the amount you should claim for the EIC.

Using the Earned Income Tax Credit as an American Living Abroad

The only way to claim the EIC is to file. US expats sometimes believe that foreign income (that is, money they earn while outside of the US) does not need to be reported. The truth is that almost all American citizens are required to file a tax return, even if they live abroad. The good news is that filing your expat taxes gives you the opportunity to qualify for and claim the EIC, which could lower the amount of taxes due or even result in a refund, depending on your situation.

However, expats should keep in mind that they must have lived in the US for at least half the year to use the Earned Income Tax Credit. If you are uncertain about whether or not you qualify, it’s best to consult with an accountant.

Need Help Filing a Tax Return on Your Foreign Income?

If you’re confused or unsure about your US expat taxes or obligations with respect to charitable giving or itemizing your deductions, consult an expat CPA for professional advice. For more information on IRS requirements, Schedule EIC, or your US expat taxes in general, contact us.