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Congress has provided substantial tax benefits for foreign workers, including missionaries. This affects what a missionary might owe in federal income taxes. It does not change Social Security tax obligations of employees working outside the U.S. In 20212022, an eligible foreign worker can exclude up to $108to $112,700 000 of income from income tax.

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• Physical Presence: The worker was present in the foreign country for 330 full days during a continuous 12-month period.
• Bona Fide Residence: The worker established residence in a foreign country for a period that includes an entire tax year. After establishing residency with the physical presence test, that worker then is a "Bona Fide Resident" in future yearyears. 

In most cases, a foreign worker will first establish physical presence during the first year of eligibility of Foreign Earned Income. After having established physical presence, foreign workers are then considered "Bona Fide Residents."  For years following, if that worker continues to live and work in a foreign location, the Bona Fide Resident definition applies in most cases. There are other qualifications for Bona Fide Residence, and a missionary should consult a tax consultant if they will not meet the physical presence test in the first year. 

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Example: A missionary staff member without a husband or dependents arrives in France on November 1, 20192020, planning to stay for four years. She rents an apartment with a one-year renewable lease, obtains a French driver’s license, and files taxes in France as a resident. She takes a two-week vacation annually back to the U.S., but otherwise lives in France until May 30, 20212022, when for personal reasons she returns to the U.S. to live. She was a resident of France for all of 20202021, and her compensation from November 1, 2019 2020 until May 30, 2021 2022 will qualify for the foreign earned income exclusion.

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For the foreign housing calculation, the base household expense amount is 16% of the foreign earned income exclusion ($108$112,700 000 x 16%=$17,392 920 in 20212022), so housing costs of less than $17,392 920 are not excludible. The maximum amount of the foreign housing exclusion is limited to 30% of the foreign earned income amount ($108$112,700 000 x 30%= $32$33,610600).

• • For 20212022, housing costs in excess of $17,392 920 but less than $32$33,610 600 can be excluded in addition to the foreign earned income exclusion.
  • A missionary whose taxable compensation is less than $108than $112,700 000 already has all of his or her income excluded by the foreign earned income exclusion.
  • A missionary who has taxable compensation of more than $108than $112,700 000 but housing costs of less than $17than $17,392 920 does not have sufficient housing costs to claim an additional exclusion for housing cost.
  • A missionary whose housing is excluded by the minister’s housing allowance already excludes housing costs from income. (There is no minimum threshold.)
  • A missionary who is required to reside on the mission’s business premises in order to perform their job (house parent at a mission school, for instance) already has the value of their housing excluded from income.
  • A missionary whose taxable compensation is more than $108$112,700000, who does not qualify for minister’s housing allowance, and whose housing costs exceed $17,392920, may claim an additional exclusion for housing (please consult your tax advisor for specifics).

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