What Is the Foreign Earned Income Exclusion? The foreign earned income exclusion is intended to prevent double taxation by excluding income taxed in another country from U.S. taxation. The U.S. Internal Revenue Service (IRS) will tax your income earned worldwide; however, if you are an American expat, this means you are taxed twice on this income.
What Is the Forex or FX? The foreign exchange market, commonly referred to as the Forex or FX, is the global marketplace for the trading of one nation’s currency for another. The forex market is the largest, most liquid market in the world, with trillions of dollars changing hands every day. It has no centralized location, and no government
What Are Foreign Exchange Reserves? Foreign exchange reserves are assets held on reserve by a central bank in foreign currencies. These reserves are used to back liabilities and influence monetary policy. It includes any foreign money held by a central bank, such as the U.S. Federal Reserve Bank. Key Takeaways Foreign exchange reserves are assets
What is Foreign Exchange Risk? Foreign exchange risk refers to the losses that an international financial transaction may incur due to currency fluctuations. Also known as currency risk, FX risk and exchange-rate risk, it describes the possibility that an investment’s value may decrease due to changes in the relative value of the involved currencies. Investors may
WHAT IS THE Foreign Housing Exclusion And Deduction The foreign housing exclusion and deduction is an allowance for taxpayers who live and work in a foreign country to exclude any amount that their employer allocates to them to cover costs related to housing. The exclusion applies regardless of whether the expenses are paid directly to the
What Is Foreign Investment? Foreign investment involves capital flows from one country to another, granting the foreign investors extensive ownership stakes in domestic companies and assets. Foreign investment denotes that foreigners have an active role in management as a part of their investment or an equity stake large enough to enable the foreign investor to
What Are Foreign Items? Foreign items are checks or drafts drawn on a financial institution (FI) that is different from the one at which it is being presented. Foreign items may also be referred to as transit items. Key Takeaways Foreign items are inter-bank transactions, consisting of a check or draft made at one bank to be
What Is Foreign Portfolio Investment (FPI)? Foreign portfolio investment (FPI) consists of securities and other financial assets held by investors in another country. It does not provide the investor with direct ownership of a company’s assets and is relatively liquid depending on the volatility of the market. Along with foreign direct investment (FDI), FPI is
What Is the Foreign Tax Credit? The foreign tax credit is a U.S. tax credit used to offset income tax paid abroad. U.S. citizens and resident aliens who pay income taxes imposed by a foreign country or U.S. possession can claim the credit. The credit can reduce your U.S. tax liability and help ensure you
What Is the Foreign Tax Deduction? The foreign tax deduction is one of the itemized deductions that may be taken by American taxpayers to account for taxes already paid to a foreign government, and are typically classified as withholding tax. The foreign tax deduction is usually taken in lieu of the more common foreign tax
