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What tax rates apply if I exceed the Foreign Earned Income Exclusion?

An individual’s tax on any foreign earned income above the exclusion amount is computed as if the foreign earned income exclusion was not claimed. The individual’s tax will be the excess of the tax that would be imposed if his or her taxable income were increased by the amount(s) excluded, and the tax that would be imposed if his or her taxable income were equal to the excluded amount(s). For this purpose, the excluded amount(s) will be reduced by the aggregate amount of any deductions or other exclusions otherwise disallowed.  The tax rate is based on both excluded and non-excluded income.


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Updated: June 2, 2018

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