Foreign Income: Foreign Earned Income & Foreign Tax Credit
Quick answer
U.S. citizens and residents are taxed on worldwide income, but a qualifying individual can exclude foreign earned income up to an annual limit by meeting the bona fide residence or physical presence test. Foreign taxes can instead be credited or deducted, but no credit is allowed on excluded income. IRC Sections 911 and 901 govern.
Foreign Earned Income & Foreign Tax Credit is tested on EA Exam Part 1 (Specialized Returns). Primary IRS reference: IRS Publication 54.
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About this EA exam topic
Foreign-income questions test the foreign earned income exclusion (FEIE) and the foreign tax credit (FTC). The EA exam tests the eligibility tests for the FEIE (bona fide residence and physical presence) and the choice between excluding income or crediting foreign taxes.
Expect questions where claiming the exclusion versus the credit produces different results, and the rule against double-benefit on the same income.
What you'll be tested on
- FEIE eligibility: bona fide residence and physical-presence tests
- The annual FEIE limit and housing exclusion basics
- Foreign tax credit vs. deduction choice
- No double benefit on excluded income
How to prepare
- Memorize the physical-presence day count and the bona-fide-residence concept.
- Remember you cannot take an FTC on income already excluded.
- Compare exclusion vs. credit outcomes in practice questions.
Practice questions for Foreign Earned Income & Foreign Tax Credit
What this topic covers
Foreign Earned Income & Foreign Tax Credit appears in Part 1: Individual Taxation within the Specialized Returns domain. VantageEA practice questions focus on how foreign income rules are applied in realistic EA exam fact patterns.
What candidates practice
Candidates practice identifying tested facts, choosing the best multiple-choice answer, and reviewing explanations tied to IRS Publication 54, IRS Form 2555, IRC §911, IRC §901. This topic supports timed 100-question PSI-style mock tests and shorter topic review sessions.
Related practice-question themes include foreign-earned-income, feie, foreign-tax-credit, form-2555.
Topic overview
Official IRS sources
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Frequently asked questions
Can I use both the exclusion and the credit?
Not on the same income. You cannot claim a foreign tax credit for taxes on income excluded under the FEIE.
Which part?
Part 1 (Individuals).
Reference?
IRS Publication 54 and Form 1116 instructions.
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