Publication 54 - Tax Guide For U.s. Citizens And U.s. Citizens Abroad

Social Security and

ity provided, where it is provided.

2) How do I qualify for the foreign

Yes. You can claim an exemption

earned income exclusion?

Railroad Retirement

This will usually be the rent your

for your nonresident alien spouse

employer pays. Situations when

on your tax return if your spouse

Benefits

To be eligible, you must have a tax

the FMV is not included in income

has no income from sources within

home in a foreign country and you

are discussed in chapter 4 under

1) Are U.S. social security bene-

the United States and is not the

must be a U.S. citizen or a resident

Exclusion of meals and lodging.

fits taxable?

dependent of another U.S. tax-

alien who is a citizen or national of

payer.

a country with which the United

5) My U.S. employer pays my sal-

Benefits received by U.S. citizens

You must use the married filing

States has an income tax treaty in

ary into my U.S. bank account. Is

and resident aliens may be taxable,

separately column in the Tax Table

effect. You must be a bona fide

this income considered earned

depending on the total amount of

or the Tax Rate Schedule for mar-

in the United States or is it con-

resident of a foreign country or

income and the filing status of the

ried individuals filing a separate re-

sidered foreign earned income?

countries for an uninterrupted pe-

taxpayer. Under certain treaties,

turn, unless you qualify as a head

riod that includes an entire tax year,

U.S. social security benefits are ex-

of household. (Also see Question

If you performed the services to

or you must be a U.S. citizen or

empt from U.S. tax if taxed by the

12 under General Tax Questions,

earn this salary outside the United

resident and be physically present

country of residence.

later. )

States, your salary is considered

in a foreign country or countries for

Benefits similar to social secur-

at least 330 full days during any

earned abroad. It does not matter

A U.S. citizen or resident mar-

ity received from other countries by

period of 12 consecutive months.

that you are paid by a U.S. em-

ried to a nonresident alien also can

U.S. citizens or residents may be

Your tax home must be in the

ployer or that your salary is depos-

choose to treat the nonresident

taxable. (Refer to our tax treaties

foreign country or countries

ited in a U.S. bank account in the

alien as a U.S. resident for all fed-

with various countries for any ben-

throughout your period of resi-

United States. The source of sal-

eral income tax purposes. This al-

efit granted by the treaty.)

dence or presence. For this pur-

ary, wages, commissions, and

lows you to file a joint return, but

pose, your period of physical

other personal service income is

also subjects the alien’s worldwide

2) As a U.S. citizen or resident,

presence is the 330 full days during

the place where you perform the

income to U.S. income tax.

how do I figure the amount of my

which you are present in a foreign

services.

U.S. social security benefits to

country, not the 12 consecutive

2) What exemptions can be

include in gross income?

months during which those days

6) What is considered a foreign

claimed by a U.S. citizen for a

occur.

country?

nonresident alien spouse who

See Publication 915, Social Secur-

was blind and 65 years of age?

ity and Equivalent Railroad Retire-

3) Is it true that my foreign

For the purposes of the foreign

The spouse did not have income

ment Benefits, to figure if any of

earned income exclusion cannot

earned income exclusion and the

from U.S. sources and was not a

exceed my foreign earned in-

your benefits are includible in in-

foreign housing exclusion or de-

dependent of another U.S. tax-

come?

come.

duction, any territory under the sov-

payer.

ereignty of a country other than the

Yes. The amount of the exclusion is

3) How are railroad retirement

United States is a foreign country.

A U.S. taxpayer can generally

benefits taxed?

limited each year to the amount of

Possessions of the United States

claim one exemption for his or her

your foreign earned income after

are not treated as foreign coun-

spouse. In addition, if the U.S. tax-

reducing that income by the foreign

The part of a tier 1 railroad retire-

tries.

payer does not itemize deductions

housing exclusion. The foreign

ment benefit that is equivalent to

on Schedule A (Form 1040), the

earned income must be earned

the social security benefit you

7) What is meant by the source

taxpayer may be entitled to a

during the part of the tax year that

would have been entitled to receive

of earned income?

higher standard deduction if his or

you have your tax home abroad

if the railroad employee’s work had

and meet either the bona fide resi-

her spouse is age 65 or older or is

been covered under the social se-

The word “source” refers to the

dence test or the physical presence

blind at the end of the year.

curity system rather than the rail-

place where the work or personal

test.

road retirement system is treated

services that produce earned in-

3) I spend $375 a month to sup-

the same as a social security bene-

come are performed. In other

4) My wife and I are both em-

port my parents who live in Italy.

fit, discussed above.

words, income received for work in

ployed, reside together, and file

I am sure this provides the bulk

a foreign country has its source in

The other part of a tier 1 benefit

a joint return. We meet the quali-

of their support. Can I claim ex-

that country. The foreign earned in-

that is not considered a social se-

fications for claiming the foreign

emptions for them?

come exclusion and the foreign

curity equivalent benefit is treated

earned income exclusion. Do we

housing exclusion or deduction are

like a private pension or annuity, as

each figure a separate foreign

It depends on whether they are

limited to earned income from

are tier 2 railroad retirement bene-

earned income exclusion and

U.S. citizens or residents. If your

sources within foreign countries.

foreign housing exclusion?

fits. Pensions and annuities are ex-

parents are not U.S. citizens or re-

plained in chapter 4 under Earned

sidents, you cannot claim exemp-

Foreign Earned

You figure your foreign earned in-

and Unearned Income. Vested

tions for them even if you provide

Income Exclusion

come exclusion separately since

dual benefits and supplemental an-

most of their support. To qualify as

you both have foreign earned in-

nuities are also treated like private

a dependent, a person generally

1) I qualify for the foreign earned

come. The amount of the exclusion

pensions but are fully taxable.

must be either a citizen or national

income exclusion and earned

for each of you cannot exceed your

The proper amounts of the so-

of the United States or a resident of

more than $78,000 during the

separate foreign earned incomes.

cial security equivalent part of tier 1

the United States, Canada, or Mex-

year. Am I entitled to the maxi-

If you each have a housing

benefits and any special guaranty

mum $78,000 exclusion?

ico for some part of the tax year.

amount, you can figure your hous-

benefits are shown on the Form

The other tests of dependency also

ing exclusion either separately or

RRB – 1099, Payments by the Rail-

Not necessarily. Although you

must be met.

jointly. See the discussion, Married

road Retirement Board, that you re-

qualify for the foreign earned in-

Couples Living Apart, in chapter 4

ceive from the Railroad Retirement

4) Should I prorate my own per-

come exclusion, you may not have

for further details.

Board. The taxable amounts of the

sonal exemption and the exemp-

met either the bona fide residence

non-social security equivalent part

tions for my spouse and

test or the physical presence test

Exemptions and

of tier 1, tier 2, vested dual benefits,

dependents, since I expect to ex-

for your entire tax year. If you did

Dependency Allowances

clude part of my income?

and supplemental annuities are

not meet either of these tests for

shown on the

Form RRB –

your entire tax year, you must pro-

1) I am a U.S. citizen married to a

No. Do not prorate exemptions for

1099 – R, Annuities or Pensions by

rate the $78,000 maximum exclu-

nonresident alien who has no in-

yourself, your spouse, and your de-

the Railroad Retirement Board,

sion based on the number of days

come from U.S. sources. Can I

pendents. Claim the full amount for

that you did meet either test during

that you receive from the Railroad

claim an exemption for my

the year.

spouse on my U.S. tax return?

each exemption permitted.

Retirement Board.

Chapter 7 How To Get Tax Help

Page 39

Publication 54 - Tax Guide For U.s. Citizens And U.s. Citizens Abroad - 2001 Page 39

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