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I am overseas and will expect to met the requirements for the foreign income exclusion. I am wondering since that income is excluded what are the implications of investing that in overseas investments. Would the gains/losses then be also exempt or would they be considered for US taxes even though they were made completely with exempt funds?
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I am overseas and will expect to met the requirements for the foreign income exclusion. I am wondering since that income is excluded what are the implications of investing that in overseas investments. Would the gains/losses then be also exempt or would they be considered for US taxes even though they were made completely with exempt funds?

In general, all income, other than that specifically excluded, is subject to US taxation. It doesn't matter where the funds originally came from. Of course, with expatriate issues, there may be specific tax treaties which override the general rules.

Ira
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The only income eligible for the exclusion (and/or the housing deduction) is earned income. Dividend/interest, capital gains, etc. are all taxable, whether from US or overseas investments. Your advantage re: unearned income is, your tax bracket starts at the bottom.

kse4
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