Question

Exercise 11-2 (Algorithmic) (LO. 2)

Mio was transferred from New York to Germany. He lived and worked in Germany for 358 days in 2019. Mio's salary for 2019 is $235,200.

Assume a 365-day year. In your computation, round any division to four decimal places before converting to a percentage. For example, 0.473938 would be rounded to 0.4739. If required, round your final answer to the nearest dollar.

What is Mio’s foreign earned income exclusion?

not 103,869

Answer 1

Foreign earned income is the income earned by US citizens residing in other countries.

Mio is residing in Germany for the purpose of her job and hence earning salary outside US.

Mio is satisfying the physical presence test i.e., she has resided outside US for a period of 358 days (which is more than the required 330 days) during the year 2019.

Foreign earned income exclusion is given to only individuals who are employees (earning salaries) or individual contractors.

Mio is an employee earning salary in Germany.

Thus, Mio is eligible for claiming the foreign earned income exclusion.

However, the maximum exclusion given for foreign earned income for the year 2019 is $105,900 only.

Therefore, out of the total salaried income of $235,200 , Mio can claim $105,900 as exclusion for foreign earned income.