Originally Posted by lupo44
Can I claim Foreign Earned Income Exclusion if I am counting days from the previous tax year to pass the physical presence test? I filed a Foreign Tax Credit in 2012. In 2013, I am eligible for Foreign Earned Income Exclusion if I count the total days I was in country.
2012: I lived and worked in a foreign country starting in June; claimed Foreign Tax Credit for 2012 U.S. tax return.
2013: I continued to live and work in the same foreign country until May. If I include 2012, I was in country for 330 days.
Am I counting the same foreign tax credit twice?
no I do not think so;you may claim FEIE partially in 2012 and 2013. The foreign earned income exclusion, FEIE, allows you to exclude from tax a certain amount of your foreign earned income , $97600 for 2013, (wages and self-employment earnings). You claim the exclusion on form 2555 and must reside outside the US and meet certain other requirements. If your income is above the exclusion amount, you can still take a foreign tax credit for taxes paid on the the income in excess of $ 97,600and this calculation is quite complicated. The foreign tax credit is available to avoid double taxation of foreign income. The credit is claimed on form 1116 and must be calculated separately for certain defined categories of income. That is, one credit for general limitation income (wages, etc.), one credit for passive income (interest, dividends, rents, etc), and so on. In calculating the credit, deductions claimed on your tax return must be allocated to both foreign and non-foreign income. If you don't want to take the credit, you can instead take any foreign taxes paid as an itemized deduction on Sch A, if you itemize. Most of the time, this is the least attractive alternative, but not always. Usually if your foreign earned income is under the exclusion amount and you do not have lots of other income, then the foreign earned income exclusion is the simplest and preferred option, if you qualify to use it.