US Contractor Abroad: FEIE, Self-Employment Tax and Double Taxation Explained
The Foreign Earned Income Exclusion (FEIE) is the mechanism US citizens use to reduce federal income tax liability while working abroad. For IT contractors on significant rates, it can represent a substantial tax saving - potentially eliminating federal income tax on most or all of their earnings. But the self-employment tax obligation and the interaction with local country taxes mean the picture is considerably more complex than the headline figures suggest.