You can revoke your choice for any tax year. You do this by attaching a statement that you are revoking one or more previously made choices to the return or amended return for the first year that you do not wish to claim the exclusion(s). You must specify which choice(s) you are revoking.

What does revoked exclusion mean?

The revoked exclusion rule is designed to prevent taxpayers abroad from switching each year between FEIE and FTC. Simply put, if you had been using FEIE then switch to using FTC, then you are prohibited from switching back to use FEIE for a period of five years.

Can a foreign earned income exclusion be used for self employment?

Or, if your gross income is higher than the cap, you are limited to the cap amount. You might eliminate your income tax liability with the foreign earned income exclusion. You cannot, however, use the foreign earned income exclusion to reduce your self-employment tax. Self-employment tax is a percentage of “self-employment income.” 10

Do you have to pay tax on foreign earned income?

You are in business abroad as a consultant and qualify for the foreign earned income exclusion . Your foreign earned income is $95,000, your business deductions total $27,000, and your net profit is $68,000. You must pay self-employment tax on all your net profit, including any amount excluded from income.

Do you get a foreign tax credit if you exclude foreign income?

Once you choose to exclude your foreign earned income or housing amount, that choice remains in effect for that year and all later years unless you revoke it. Once you choose to exclude either foreign earned income or foreign housing costs, you cannot take a foreign tax credit for taxes on income you exclude.

What is the foreign earned income exclusion for 2016?

The foreign earned income exclusion says that a certain amount of “foreign earned income” will not be taxed for Americans living and working abroad. The amount of “foreign earned income” that is not taxed is $101,300 for 2016 and $102,100 for 2017. “Earned income” is money you make by providing services to people.