S Corp Foreign Earned Income Exclusion

USA Discussion in 'General Tax Discussion' started by M71893, Nov 24, 2017.

  1. M71893


    Nov 24, 2017
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    I am the Sole Owner of an S-Corporation. I am living overseas and qualify for the Foreign Earned Income Exclusion via the physical presence test.

    I will receive the profits from the S Corp in two ways. A salary and a distribution. Let’s say that my salary will be $40,000 and my distributions will be $20,000. Also, I actively work to generate all the income, it is not passive (rental properties, etc.)

    My salary will be foreign earned income and not subject to Income Tax, but it will be subject to Self Employment Tax.

    Are my distributions considered Foreign Earned Income? Will I be able to take the $20,000 distribution and non pay any Income Tax or Self Employment Tax on it?

    Thanks for your help!
    M71893, Nov 24, 2017
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  2. M71893

    Drmdcpa VIP Member

    Aug 2, 2017
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    If you meet the exclusion it will only be for salaries. S corp distributions are not earned income.

    I am assuming you are a US citizen. Otherwise you could not have an S Corp.
    Drmdcpa, Nov 24, 2017
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