Helen is a U.S. citizen and a CPA who moved to London, England, three years ago to work for a British company. This year, she spent the entire year in London and earned a salary of $140,400. How much of her salary will she be allowed to exclude from gross income in the United States?

Question

Quizplus · Accepted Answer

As a U.S. citizen living and working abroad, Helen may qualify for the foreign earned income exclusion. However, the exclusion is subject to a limit that is adjusted annually for inflation. For the tax year 2021, the limit is $108,700. Since Helen's salary of $140,400 exceeds this limit, she can only exclude up to the limit amount. Therefore, the amount of her salary that she can exclude is $108,700, and the remaining $31,700 is included in her gross income. Therefore, the correct choice is B).

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