THE FOREIGN EARNED INCOME TAX EXCLUSION FOR INDIVIDUALS: ANALYSES AND ALTERNATIVES

THE FOREIGN EARNED INCOME TAX EXCLUSION FOR INDIVIDUALS: ANALYSES AND ALTERNATIVES

Library of Congress Cataloging-in-Publication Data

CONTENTS

PREFACE

Chapter 1: TAX POLICY: ECONOMIC BENEFITS OFINCOME EXCLUSION FOR U.S. CITIZENS WORKING ABROAD ARE UNCERTAIN

WHY GAO DID THIS STUDY

WHAT GAO RECOMMENDS

WHAT GAO FOUND

ABBREVIATIONS

BACKGROUND

RELATIVELY FEW INDIVIDUAL TAXPAYERS CLAIMED THE FOREIGN EARNED INCOME EXCLUSION, AND CLAIMING IT IS MORE BENEFICIAL THAN THE FOREIGN TAX CREDIT FOR THOSE IN LOWER TAX COUNTRIES

U.S. TAX COSTS COULD INFLUENCE SOMEU.S. OVERSEAS EMPLOYMENT DECISIONS, THOUGH THERE IS LITTLE EVIDENCE THE TAX EXPENDITURE AFFECTS EXPORTS

THE TAX EXPENDITURE’S NET EFFECTS ON ECONOMIC EFFICIENCY AND EQUITY ARE UNCERTAIN; SOME ALTERNATIVES COULD BETTER TARGET BENEFITS BUT WOULD ADD COMPLEXITY

CONCLUDING OBSERVATIONS

AGENCY COMMENTS AND OUR METHODOLOGY

APPENDIX I. OBJECTIVES, SCOPE, AND METHODOLOGY

APPENDIX II. PROVISIONS THAT INTERACT WITH SECTION 911

APPENDIX III. COMPARISON OF TAX COSTS OF U.S. AND NON-U.S. WORKERS UNDER THE FOREIGN EARNED INCOME EXCLUSION IN DIFFERENT HYPOTHETICAL HOST COUNTRIES AND AT DIFFERENT INCOME LEVELS

APPENDIX IV. ASSESSMENT OF THE CURRENT TAX EXPENDITURE AND FOUR ALTERNATIVES

Chapter 2: INDIVIDUAL FOREIGN-EARNED INCOME AND FOREIGN TAX CREDIT, 2011

FOREIGN-EARNED INCOME HIGHLIGHTS

FOREIGN TAX CREDIT HIGHLIGHTS

OVERVIEW OF FOREIGN-EARNED INCOME PROVISIONS

TOTAL FOREIGN-EARNED INCOME

FOREIGN-EARNED INCOME EXCLUSION, HOUSING EXCLUSION, AND HOUSING DEDUCTION

OVERVIEW OF FOREIGN TAX CREDIT PROVISIONS

FOREIGN-SOURCE GROSS INCOME

FOREIGN TAXES AND FOREIGN TAX CREDIT

SUMMARY

DATA SOURCES AND LIMITATIONS

ADDITIONAL TABULAR DATA ON TAX STATS

EXPLANATION OF SELECTED TERMS

INDEX