Certain Income Not Excludable
Under the law, certain U.S. citizens or resident aliens, specifically contractors or employees of contractors supporting the U.S. Armed Forces in designated combat zones, may now qualify to use the foreign-earned income exclusion.
Even though you may have an abode located in the U.S., if you are performing personal services when your tax home is in a foreign country, and you meet certain other tests, you may be able to exclude up to $126,500 of income for 2023.
The foreign-earned income exclusion is not automatic. To claim this benefit, you need to file a special form 2555. Also, it’s critical to point out that if you choose the foreign-earned income exclusion, you cannot take advantage of any other exclusion, deduction or credit related to the excluded income. This includes any expenses, losses or other items that would have been deductible had the exclusion not been claimed.