Tag Archives: FTC

Treasury’s Claim That The FEIE Is A Costly Expenditure, Whether True Or False, Is A Strong Argument FOR Tax Reform

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Prologue

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.

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?

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Airline and cruise ship employees: how income earned in international waters may lead to double taxation for (only) Americans abroad

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Oliver Wagner, CPA and John Richardson – January 16, 2022

Americans abroad and the presumption of double taxation

Prologue: For whom the bell tolls …

Whether a US citizen lives in (and is a tax resident of) Mexico and works on a ship in international waters

Or Whether A US citizen lives in (and is a tax resident of) Holland and is an airline pilot …

That US citizen, because and only because of the combination of US citizenship-based taxation coupled with living outside the United States, is likely to be subject to double taxation. The following discussion explains why.

A Summary Podcast …

Part A: Introduction – About Citizenship-based Taxation
Part B: How the Internal Revenue Code is designed to mitigate the effects of double taxation in certain circumstances
Part C: Determining what is “foreign source” income
Part D: The problem of international waters …
Part E: The effect of sourcing to the US income earned in international waters by dual tax residents
Part F: Deducting “foreign taxes” paid – although income from international waters may not be foreign, it is still subject to the payment of “foreign taxes”
Part G: Can a US citizen living abroad be saved by a tax treaty? Maybe if he/she lives in Canada****
Part H: Conclusion and the need for “Pure Residence-Based Taxation”

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