US Earned-Income and the Foreign Tax Credit- Will it Help You?

If you are a bona fide resident of another and work occasionally in the US, you are going to be taxed on the income you earn with in the States. But can you use the Foreign Tax Credit to offset those taxes? David McKeegan, Greenback co-founder, has your answer!


Hi, everybody. My name is David McKeegan. I’m with Greenback Expat Tax Services. Our question today is: “I’m a bona fide resident and I’m going to be working in the United States for a period of time. Can I exclude the income I earn in the United States on my US taxes using the Foreign Tax Credit since I’m a bona fide resident of a foreign country?”

The answer is actually pretty easy. It’s no. The Foreign Tax Credit can only be used to exclude taxes that you pay to a foreign country on your foreign earned income. Likewise, the Foreign Earned Income Exclusion could not be used in this case either because the income you’re earning is being earned in the United States. You’re going to have to pay US tax on that income because it was earned while you were physically in the United States.

The good news is that your host country, the country in which you’re a bona fide resident, probably will not tax you on that income because it wasn’t earned in that host country; it was earned in the United States. Unfortunately, if you are working in the US on business those funds will not be excluded for your taxes. You will have to pay US income tax on those funds. If you have any other questions please let us know. Thank you.

Need more business expat tax advice?

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