Foreign Earned Income (Taxpayer or Spouse) includes:

• Portion of W-2 wages earned while working outside the United States
• Portion of foreign wages earned while working outside the United States
• Portion of self-employment income (profits) earned while working outside the United States

US Earned Income (Taxpayer or Spouse) includes:

• Portion of W-2 wages earned while working inside the United States
• Portion of self-employment income (profits) earned while working inside the United States
• Any W-2 income received directly from the US government, such as miliary salary or government service civilian salary is considered US-earned income for the purposes of the FEIE, even if it was earned while outside the US.

Interest includes:

• Interest from items such as savings accounts and bonds, ususally reported on a 1099-INT.

Rental Property Profit or (Loss) includes:

• Profits from rental real estate, royalties, partnerships, S corporations, estates, trusts, and residual interests. This is normally filed to the IRS on a Form 1040 Schedule E.
• You must include depreciation as an expense, which often results in a loss on paper.
• You cannot use passive losses to offset any active income or portfolio income, but you may use the to offset passive income in the current year or the future using IRS Form 8582.

Traditional IRA/401K/TSP disbursements or roth conversions:

• Distributions from traditional IRA/401(k)/TSP accounts
• Conversions from traditional IRA/401(k)/TSP to Roth accounts

Pensions & Annuities include:

• Taxable pensions such as a US military pension.
• Taxable annuities.
• This does not include non-taxable Veterans Administration benefits.

Short-Term Capital Gains include

• Gains from the sale of assets held for less than one year. These are generally taxed at ordinary tax rates instead of favorable tax rates reserved for long-term capital gains.
• Enter capital losses as a negative value. Up to $3,000 per year of capital losses can be used to offset other sources of income, such as wages.

Unqualified Dividends include

• Unqualified dividends are dividends that do not meet IRS requirements to be treated as qualified—typically due to not meeting the required holding period or because the dividends come from certain types of companies or foreign corporations.
• Investment statements usually report **total ordinary dividends** and **qualified dividends**. In this case, the amount of **unqualified dividends** is simply the difference: ordinary dividends minus qualified dividends.

Long-Term Capital Gains include

• Long-term capital gains are profits from selling investments—such as stocks, mutual funds, or real estate—that you held for more than one year. These gains are taxed at special, generally lower tax rates compared to short-term capital gains.
• Brokerage statements typically report both short-term and long-term capital gains separately. The long-term portion reflects your gains on assets held longer than one year and qualifies for the favorable long-term capital gains tax rates.
• Enter capital losses as a negative value. Up to $3,000 per year of capital losses can be used to offset other sources of income, such as wages.

Qualified Dividends include

• Qualified dividends are dividends that meet specific IRS criteria to be taxed at the lower long-term capital gains rates. To qualify, the dividend must come from an eligible U.S. or qualified foreign corporation, and you must meet the required holding period for the stock.
• On most investment statements, qualified dividends are listed separately from total ordinary dividends. The qualified amount is the portion of your ordinary dividends that receives the favorable tax rate.

Additonal Topics That Mase Arise

• Child Tax Credit (CTC)
  • The Child Tax Credit reduces your U.S. income tax based on the number of qualifying children under age 17 with the appropriate passport, and the credit amount phases out at higher income levels.
  • For expats using the Foreign Earned Income Exclusion, the credit is nonrefundable, meaning that you only see the value if it can offset regular taxes.
  • Importantly, the Child Tax Credit cannot be used to offset either the Net Investment Income Tax (NIIT) or the Self-Employment Tax, which are not regular taxes.
• Net Investment Income Tax (NIIT)
  • The NIIT is a 3.8% surtax applied to investment income—such as dividends, interest, capital gains, and passive rental income—once your modified adjusted gross income exceeds specific thresholds, $250,000 for married filing jointly.
  • This tax applies separately from regular income tax and is not affected by the Foreign Earned Income Exclusion, meaning excluded wages do not reduce the income used to determine NIIT.
• Self-Employment Tax (SE Tax)
  • Self-employment tax covers the Social Security and Medicare taxes on net earnings from self-employment and applies even if those earnings are excluded from income tax using the FEIE.
  • It is calculated on net business profit reported on Schedule C and then carried to Schedule SE, where the combined 15.3% rate is applied before any available adjustments.

Limitations of This Estimator

This calculator provides a simplified estimate for general planning or determining withholding using IRS Form W-4 or Form 673. It omits or simplifies the following items:

• Detailed rules for determining U.S. vs. foreign-sourced income
• Self-employment deductions, including qualified business income (QBI)
• Other tax credits, such as the child care tax credit.