Originally Posted by
rotorhead1026
Sky, what you call the "exemption" (actually an exclusion) reduces AGI, and thus helps to reduce your state income tax. Also, the true tax "exemption" (foreign tax credit - offsets foreign taxes actually paid) doesn't quite cover everything for various reasons. Net result is you'll pay quite a bit less with the exclusion - if you can qualify - even using the foreign tax credit. If your legal US residence is in a state with no income tax, or you actually live overseas, then the effect isn't as pronounced.
This "FEIE" exclusion is an often debated benefit for U.S. citizen pilots. You guys at EK know how aggressive the IRS is becoming. I have worked with multiple expat tax attorneys/tax preparers/CPA's since moving offshore, and have to think you will for sure get "reviewed" if you try to claim it without actually meeting the residency requirements. Which means forget using this quite valuable tax savings with these USA basing or reverse roster schemes.
Be careful, our government is broke and predatory. And pilots are tasty meat for them as many of us know......