Eligible taxpayers may be able to exclude foreign earned income from gross income if they meet certain conditions. They can qualify for an exclusion if they’re U.S. citizens or resident aliens, specifically contractors supporting U.S. Armed Forces in designated combat zones, who have their tax homes in a foreign country. 

The Bipartisan Budget Act of 2018, enacted in February, changed the tax home requirement for eligible taxpayers serving in an area designated by a presidential executive order as a combat zone can claim a foreign tax home, even if their tax home is in the U.S. 

The new law applies for the tax year 2018 and subsequent years. Full details on the foreign earned income exclusion can be found in Publication 54. (IR-2018-173, Aug. 24, 2018)

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