By now you have hopefully garnered enough information about this whole 330 Day Challenge to know the IRS is willing to let you travel the world and give you a $104,100 deduction for your troubles. It’s extraordinary, amazing, and any other adjective you can think of.
But what if I told you it could get even better, that the IRS is willing to offer you an even bigger deduction? What if I told you they were willing to DOUBLE that deduction and let you write off $208,200 on your taxes? Now I really must be dreaming.
Except it’s true. The IRS is very willing to let you write off up to $208,200 per year if you meet one key requirement on your 330 Day Challenge.
You simply have to bring an income earning spouse with you.
Exclusion is Per Adult
You see this spectacular foreign earned income exclusion isn’t just based on one person. Each adult on your tax return who earns income while living overseas can also qualify. And if you are married filing jointly (almost always the best way for married couples to file) there are two adults on your return. If you both earn income, you both qualify for the deduction.
Pretty incredible, right?
How to Take Advantage
If you are an employee who has the ability to work remotely and take advantage of the foreign earned income exclusion, there’s not too much you can do to take advantage of the double deduction. Your spouse either has a similar job she can do remotely, or they don’t. I guess you could try and convince your work to hire your spouse as well! But good luck with that one.
But if you own a business, there is absolutely something you can do to help double dip your exclusion… you can hire your spouse.
Lets say that your business makes $500,000 profit per year and that you are an S Corp. And because you know your choice of entity impacts your FEIE you are paying yourself a salary of $105,000 per year to max out your $104,100 deduction. Now, because you want your spouse to also get a $104,100 deduction, you put him on a $105,000 salary as well.
Boom. Now your amazing foreign earned income exclusion just doubled. Now your tax savings are through the freaking roof. Now you are not only funding your trip abroad, you are asking me to come with you and picking up the tab!
OK, OK I’m pushing it on that last one, but the point remains. With a little planning and some smart adjustments, you can take this whole foreign earned income exclusion to a whole new level.