Table of Contents
For the latest information about developments related to Pub. 54, such as legislation enacted after it was published, go to www.irs.gov/pub54.
Denial or revocation of United States passport. On December 4, 2015, as part of the Fixing America’s Service Transportation (FAST) Act, Congress enacted section 7345 of the Internal Revenue Code, which requires the Internal Revenue Service to notify the State Department of taxpayers certified as owing a seriously delinquent tax debt. The FAST Act generally prohibits the State Department from issuing or renewing a passport to a taxpayer with seriously delinquent tax debt. Seriously delinquent tax debt means an unpaid, legally enforceable federal tax debt of an individual totaling more than $50,000 for which, a Notice of Federal Tax lien has been filed and all administrative remedies under IRC section 6320 have lapsed or been exhausted, or a levy has been issued. If you are individually liable for tax debt (including penalties and interest) totaling more than $50,000 and you do not pay the amount you owe or make alternate arrangements to pay, we may notify the State Department that your tax debt is seriously delinquent. The State Department generally will not issue or renew a passport to you after we make this notification. If you currently have a valid passport, the State Department may revoke your passport or limit your ability to travel outside the United States. Additional information on passport certification will be available in February 2017 at www.irs.gov/passports.
Individual taxpayer identification number (ITIN) renewal. An ITIN for a nonresident alien spouse or dependent used on a prior year income tax return may require renewal. For more information see the Instructions for Form W-7, Application for IRS Individual Taxpayer Idenditification.
Exclusion amount. The maximum foreign earned income exclusion is adjusted annually for inflation. For 2016, the maximum exclusion has increased to $101,300. See Limit on Excludable Amount under Foreign Earned Income Exclusion in chapter 4.
Housing expenses — base amount. The computation of the base housing amount (line 32 of Form 2555) is tied to the maximum foreign earned income exclusion. The amount is 16 percent of the exclusion amount (computed on a daily basis), multiplied by the number of days in your qualifying period that fall within your 2016 tax year. For 2016, this amount is $44.28 per day ($16,208 per year). See Housing Amount under Foreign Housing Exclusion and Deduction in chapter 4.
Housing expenses — maximum amount. The amount of qualified housing expenses eligible for the housing exclusion and housing deduction has changed for some locations. See Limit on housing expenses under Foreign Housing Exclusion and Deduction in chapter 4.
Filing requirements. Generally, the amount of income you can receive before you must file an income tax return has increased. These amounts are shown in chapter 1 under Filing Requirements .
Self-employment tax rate. For 2016, the maximum amount of net earnings from self-employment that is subject to the social security part of the self-employment tax remains at $118,500. All net earnings are subject to the Medicare part of the tax. For more information, see chapter 3.
IRA limitations for 2016. . You may be able to take an IRA deduction if you were covered by a retirement plan and your 2016 modified adjusted gross income (AGI) is less than $71,000 ($118,000 if married filing jointly or a qualifying widow(er)). These limits are unchanged from 2015. If your spouse was covered by a retirement plan, but you were not, you may be able to take an IRA deduction if your 2016 modified AGI is less than $194,000. See the Instructions for Form 1040 or the Instructions for Form 1040A for details and exceptions.
Figuring tax on income not excluded. If you claim the foreign earned income exclusion, the housing exclusion, or both, you must figure the tax on your nonexcluded income using the tax rates that would have applied had you not claimed the exclusions. See the Instructions for Form 1040 and complete the Foreign Earned Income Tax Worksheet to figure the amount of tax to enter on Form 1040, line 44. If you must attach Form 6251 to your return, use the Foreign Earned Income Tax Worksheet provided in the Instructions for Form 6251.
Form 8938. If you had foreign financial assets in 2016, you may have to file Form 8938 with your return. See Form 8938 in chapter 1.
Photographs of missing children. The IRS is a proud partner with the National Center for Missing & Exploited Children® (NCMEC). Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child.
This publication discusses special tax rules for U.S. citizens and resident aliens who work abroad or who have income earned in foreign countries.
If you are a U.S. citizen or resident alien, your worldwide income generally is subject to U.S. income tax, regardless of where you are living. Also, you are subject to the same income tax filing requirements that apply to U.S. citizens or resident aliens living in the United States. Expatriation tax provisions apply to U.S. citizens who have renounced their citizenship and long-term residents who have ended their residency. These provisions are discussed in chapter 4 of Pub. 519, U.S. Tax Guide for Aliens.
Green card test. You are a U.S. resident if you were a lawful permanent resident of the United States at any time during the calendar year. This is known as the green card test because resident aliens hold immigrant visas (also known as green cards).
Substantial presence test. You are considered a U.S. resident if you meet the substantial presence test for the calendar year. To meet this test, you must be physically present in the United States on at least:
31 days during the current calendar year, and
A total of 183 days during the current year and the 2 preceding years, counting all the days of physical presence in the current year, but only 1/3 the number of days of presence in the first preceding year, and only 1/6 the number of days in the second preceding year.
You were physically present in the United States on 120 days in each of the years 2014, 2015, and 2016. To determine if you meet the substantial presence test for 2016, count the full 120 days of presence in 2016, 40 days in 2015 (1/3 of 120), and 20 days in 2014 (1/6 of 120). Because the total for the 3-year period is 180 days, you are not considered a resident under the substantial presence test for 2016.
Whether you must file a U.S. tax return,
When and where to file your return,
How to report your income if it is paid in foreign currency,
How to treat a nonresident alien spouse as a U.S. resident, and
Whether you must pay estimated tax.
Contributions to foreign organizations,
Foreign moving expenses,
Contributions to individual retirement arrangements (IRAs), and
Internal Revenue Service
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