After commencement, many college graduates begin packing their bags for a job teaching English abroad. If you’re one of them, it’s a great opportunity to experience other countries and other cultures, and make money at the same time.
Be aware, though, that the making money part has tax implications.
Yep, even if you’re not making money here in the good, old U S of A, as an American citizen, you still must file an income tax return and pay any taxes owed on income earned abroad.
Fortunately – unfortunately, some might say – you likely won’t make enough to owe taxes. Here’s why: The IRS will allow you to exclude income up to $100,800 in 2015. It’s called the foreign earned income exclusion – fancy, right?
To qualify, you must meet the physical presence test.
Physical presence means you must be living in a country outside the United States for 330 days of any 365-day period. You can count days you spent abroad for any reason, including vacation time.
If you must leave a country because of civil unrest or other adverse conditions, you may be able to get a waiver to the physical presence test. If illness or other issues cause you to leave the country before you reach the 330-day period, you won’t pass the physical presence test.
That brings us to an illness you may experience during your time away – homesickness. If you’re missing family, you can visit, but not for more than 30 days. If you do, you’ll fail the physical presence test, and you’ll have to pay taxes on your earnings. That will make you a different kind of sick.
If you’re feeling homesick, try some of these tips.
The tips are borrowed from TEFL (Teaching English as a Foreign Language), and they should help get you over the hump so you can enjoy your time teaching English abroad.
- Get out – You’re in a whole new place. Go sightseeing. Visit a national park. Do something you love – like hiking or kayaking – in a new location.
- Find home – You’re bound to find a McDonald’s or a local place that serves up a taste of America. Stop in and check it out.
- Make friends – Co-workers and others can be a resource for finding new adventures.
- Learn something new – Pick up a new skill. Maybe martial arts are popular in your area. Sign up for a class and add something new to your schedule.
- Phone home – Keep in touch with family and friends, especially when you’re hankering for the comfort of home.
- Invite guests to visit you – You don’t have to keep this new experience to yourself. Have family and friends come to you.
Once you get back home
Talk with a tax preparer or check out Publication 54 on the IRS website. Both will tell you all about Form 2555, which allows you to claim the foreign earned income exclusion. You must attach it to your Form 1040 when you file your taxes. Remember, you likely won’t owe taxes, but you still will need to file your income tax return to claim the foreign earned income exclusion.
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