The main benefit of being a U.S. Expatriate (American Citizen or a U.S. permanent resident living abroad) is the foreign earned income exclusion when an expatriate prepares his/her U.S. tax return. U.S. Expats who live outside the U.S. for 12 consecutive months and spend no more than 30 days in the U.S. during this 12 month period may be able to exclude a substantial amount ($92,900 for 2011, $95,100 for 2012, $97,600 for 2013, $99,200 for 2014 and $100,800 for 2015) of their earned income from being taxed.
The foreign earned income exclusion may be claimed by a U.S. Expatriate and his/her spouse if both have earned income and meet the requirements. If both U.S. Expatriates meet the requirement their foreign income exclusion will be twice the amount.
The foreign earned income exclusion cannot be claimed by U.S. Expatriates who are employees of the U.S. government or by U.S. Expatriates under a Personal Service Agreement with a U.S. government agency or instrumentality.
In order for a U.S. Expatriate to claim the foreign earned income exclusion the U.S. Expatriate must complete IRS form 2555 when the U.S. Expatriate’s tax return is prepared.
If you are a U.S. Expatriate who does not qualify for the foreign earned income exclusion then your best option is to claim a tax credit (foreign tax credit) for the tax you paid abroad.