Prologue
Tax reform for #Americansabroad is a struggle for control of the narrative. What is fact? What is fantasy? How to tell the difference? Can cost estimates be invented? Your input is requested. Sat – Feb. 1/25 – 13:00 EST (18:00 GMT) https://t.co/KAJ4mSzxhT
— John Richardson – Counsellor for US persons abroad (@ExpatriationLaw) January 31, 2025
On January 29, 2025 a post by Keith Redmond on X.com suggested that Treasury had identified the Foreign Earned Income Exclusion (“FEIE”) – found in Internal Revenue Code 911 – as a tax expenditure costing the Treasury 5.6 billion dollars a year.
The Foreign Income Exclusion is on the Trump cutting block. #FEIE #FATCA #RBT pic.twitter.com/fXgsVfKPoy
— Keith REDMOND 🟦▪️🎹▪️ 🇺🇸🇫🇷🇪🇺▪️ (@Keith__REDMOND) January 29, 2025
Keith’s post immediately generated discussion with CPA Phil Hogan. Phil noted that those Americans abroad who used the FEIE probably would not owe tax on income excluded by the FEIE. He noted that Foreign Tax Credits could be used to offset the taxes owed on the income excluded by the FEIE. Phil’s point (confirmed by CPA Kevyn Nightingale) is incredibly important.
(I have included, as an Appendix to this post an analysis of WHY many (if not most) Americans abroad who file using the Foreign Earned Income Exclusion would NOT owe U.S. tax, if the income excluded under the FEIE were included as U.S. taxable income. The short explanation is that if the income were INCLUDED on the U.S. tax return, taxes paid in the country of residence, would be used to effectively pay the U.S. tax on that included income. See the Appendix for further discussion).
Is The Claim That The Foreign Earned Income Exclusion Costs The U.S. Tax Revenue Really Credible?