954 / When a U.S. citizen is a resident of a foreign country and earns income in that foreign country, is that income included in the taxpayer’s gross income for U.S. tax purposes?

Despite this, a U.S. citizen with foreign earned income may be eligible to exclude all or a portion of foreign earnings from calculation of his or her income for U.S. tax purposes (see Q 955).² “Foreign earned income” includes amounts received by the individual from sources within a foreign country that are attributable to services performed by the individual.³ Pension and annuity income, amounts paid to the individual by the U.S. (or a U.S. agency) as an employee, and amounts paid to the individual under Section 402(b) (taxability of beneficiaries of nonexempt trusts) or Section 403(b) (taxability of beneficiaries under nonqualified annuities) are excluded from foreign earned income.⁴