How to make $100,000 Tax Free with the Foreign Earned Income Expemption

This was my first year making enough money online to worry about paying taxes.  I know I should have just been happy to have this high value problem, as making enough to worry about taxes is far better than making so little money, as I was doing in previous years where I didn't even need to pay taxes.

But it was confusing.  Instead of getting a simple W2 form as I was used to, all of the sudden I was a small business owner.  I was also getting 1099 independent contractor forms and knew I didn't want to pay 25%-50% tax as it would be devastating.

Luckily, running my own Podcast I have access to people who I would normally have to pay $300 an hour to speak with on the phone for a consultation.  Better yet, I recorded conversation with the Q&A to help others in the same situation.  I'll link to the episode below.

But here's the summary of what I learned:

Location Independant Businesses Thrive in 2014

Foreign Earned Income Exclusion is awesome!

If you are a U.S. citizen or a resident alien of the United States and you live abroad, you are taxed on your worldwide income. However, you may qualify to exclude from income up to an amount of your foreign earnings that is adjusted annually for inflation $97,600 for 2013. In addition, you can exclude or deduct certain foreign housing amounts.

Basically you can be tax exempt for the first $97,600 in income each year as long as you are out of the U.S. for more than 330 days.  What this means is I can be in the U.S. for 35 days this year for weddings, holidays, birthdays etc, and as long as I keep my trip short, I save a TON of income tax. How much?  Up to $30,000, which is basically my entire costs of living for a year overseas including plane tickets and vacations.

Wedding/Business Trip =)

Travel Expenses are awesome!

The biggest downside to making too much money with your business is having to pay tax on the profit. The great thing about having a location independent business especially being your own boss is being able to write off travel expenses.

  • Want to have a meeting in Las Vegas?  Write off.
  • Want to visit some suppliers in Thailand?  Write off.
  • Want to do some business deals in Europe this summer?  Write off.
  • Plane tickets?  Write off.
  • Hotels?  Write off.

How to Write off Travel Expenses:

First off, document everything.  I put every potential travel or business related expense on my credit card to make it super easy for my accountant to add up my expenses at the end of the year.  Plus you get a ton of reward miles by doing so.  In the past three months since my last free flight to and from the U.S. I've accumulated enough miles already for another free round trip flight to anywhere in the world.

I received 40,000 points as a sign up bonus, but in the past two months I've earned another 100k or so through churning products on my drop shipping stores.

How much is that worth?

My current 149,958 miles is worth $1,499.95 in anything travel related which includes airfare, hotels, rental cars, or even meals at hotels.

Racking up those miles!

How to Save Money on Taxes:

The steps are pretty simple.  Keep track of how many days you spend in the U.S. and make sure you are out of the country for a full 330 days this year.  Then document every travel and business expense on a credit card.  For me I used the same accounting company that I interviewed on the podcast a few months ago because this is what they specialize in.

I don't get any credit for referring you and I paid full price to do my own taxes, but these guys are the easiest and best option I've found.

You can listen to Episode 11 of the podcast.

2018 Update: I've now switched to using a different expat tax provider as Greenback was good for the basics but couldn't handle my now more complex taxes using an IBC in Belize. 

Also, last year's talk at the Nomad Summit conference in Las Vegas was tax accountant Grace Taylor that's talk summarized everything you need to know in 37 minutes that normally takes years and thousands of dollars to learn! Watch it and take notes! 

This doesn't apply to me, I don't have a business and I can't afford to travel? 

Read this: How I've been Able to Afford my Life of Travel:  A Six year journey of self discovery, adventures, failures, and ultimately success.

I wish everyone the best of luck in their own journeys, keep in touch!

Warm Regards,


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Post a Comment

  1. Thanks for the info Johnny! I purchased your e-book last week, and I have been listening to all of your podcasts. All great information, and very interesting stuff!! I'll be making my first leap into the amazing lifestyle next month. I'll be in Medellin for a few months, and then finally making the jump to Chiang Mai in late November! Hope to run into you at one of the awesome coffee shops or at Punspace! Thanks again!

    1. Hey Nick, glad you've been enjoying all of the info and the podcast buddy! Medellin is going to be incredible, enjoy all the great food out in Columbia for me. Let me know when you make it out to Chiang Mai in November and we'll definitely grab lunch. I always love to meet people who take the leap and make it happen. If you've enjoyed the book and the podcasts do me a huge favor and give it a 5 star rating on Amazon and in the iTunes store as it helps other people find it. Thanks Nick and keep crushing it!

    2. Sounds great! I'll definitely be in touch! And I gladly left you an awesome review on Amazon!

  2. Hey Johnny,

    What credit card company/rewards program do you recommend for accruing sky miles? Your posts are incredibly inspirational and I may further explore the possibility of signing up for one -- I currently have reward points with Chase.


    1. Hey Ric, glad you've been enjoying the blog. I used to use the Capital One Venture Card and recently switched to the Barclay Arrival card. I wrote about it here:

      I'm glad you are inspired to start crushing it buddy. Make sure you check out the Recommended Resources page for everything I currently use. I'll add a section for Credit cards just now.

  3. Johnny,

    Thanks for the prompt response, I will peep the recommended resources page when I get a chance and study the Barclay Arrival Card post. Keep up the amazing content, it gives me something to look foward to each week.


    1. No worries Ric, thanks for taking the time to leave a comment and keep me updated on your journey man!

  4. Hi Johnny, thanks this was a really insightful blog post. I also listened to your podcast when you interviewed David McKeegan. Do you happen to know anything about US Permanent Residents (green card holders) and the tax implications for them? If it's any different from US citizens or if you have to be in the country an x amount of days? Thanks!

    1. Hey Max,

      Glad you enjoyed the blog post and the episode. Not sure about the green card holder situation. I would just contact GreenBack and see what they say.

    2. FYI: US Green Card holders should not attempt to stay outside the US for extended periods of time as that would be endanger their green card status. A few months is ok but any longer and you'll get into serious trouble. Source: a green card holder.

    3. Hey Uee, thanks for the info. Makes sense.

  5. Hey Johnny, this rule was created to avoid people paying dual taxes (US and country of residence). Do you pay tax in Thailand? If so, at what percent of your income?

    I'm sort of in the same situation and would love to hear your take.

    1. I know friends that have jobs such as teaching English here in Thailand use it to avoid paying dual taxes. I'd just contact your account or greenback as they'll know more than I regarding taxes.

    2. Jonny, I wouldn't mention anything about how much you pay in Thai taxes online. That anonymous individual may very well be an I.R.S. snoop reaching for someone to milk. They actually paid staff who they put online to monitor blogs and social networking.

    3. Hey Grey, thanks for your advice. As far as I know I'm utilizing all of the tax codes to my benefit but my accountant wouldn't let me get away with anything illegal anyways so I'm not worried, but thanks for the heads up. =)

  6. That is the article I was looking for. Your article gives me another approach on this issue. I hope to read more articles from you.

  7. I'm glad to be able to share! Also listen to this recent podcast episode:


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