Income Earned Abroad

Increase the Tax Exemption Amount for U.S. Workers Stationed Abroad

Background:

  • The Foreign Earned Income Exclusion provides a limited exclusion from the taxation of income earned by U.S. workers abroad. U.S. workers are generally subject to U.S. income tax on their income earned abroad. They may also be taxed on their income by the foreign country in which they work. Section 911 of the Internal Revenue Code allows up to $80,000 in income to be excluded from federal taxes; however, the exclusion has not been adjusted for inflation.

AGC Message:

  • The United States is the Only Nation to Tax Overseas Workers. The United States for many years has been the only major nation that taxes income or workers abroad. The consequence of this policy is higher costs for U.S. companies utilizing U.S. workers in foreign countries. The higher cost of U.S. workers means less competitive bids and fewer jobs for American firms seeking work abroad. Section 911 helps level the international playing field by enabling U.S. companies to compete with our foreign counterparts.
  • Puts United States Workers at a Disadvantage. The Section 911 exclusion allows American companies to be more competitive in foreign markets, which, ultimately, is beneficial to our domestic economy. American contractors are at a distinct disadvantage vis-à-vis our foreign competitors. The cost of hiring an American worker for foreign jobs is already high given the many non-salary costs included in their income, such as travel reimbursement, lodging, and other necessary expenses for working abroad.
  • Housing Tax Exemption Removed for U.S. Workers. In 2006, Congress limited the housing tax exemption for U.S. workers abroad, causing an increase in costs to U.S. firms with employees temporarily working overseas. AGC is working to ensure American companies are more competitive in foreign markets by repealing the 2006 change and increasing the exemption.