Individuals Working Outside the US

Postdoctoral Scholar 0

U.S. Citizens and Resident Aliens

U.S. citizens and resident aliens (includes Lawful Permanent Residents) are taxed on their worldwide income.

The University does not withhold taxes or report your fellowship on a W-2 because it is not considered earned income. However, unless you are a candidate for a degree and use the fellowship to pay for qualified educational expenses, the fellowship is taxable income to you. IRS publication 970 provides details on the taxability of fellowships.

If you receive compensation in addition to your fellowship, the University will withhold taxes and report that compensation to you on a W-2. (See US Tax Information, Summary of Taxes.) Individuals living and working outside the US may be able to exclude all or part of their foreign income and housing or deduct a foreign housing amount. To claim the foreign earned income exclusion, the foreign housing exclusion, or the foreign housing deduction, you must have foreign earned income, your tax home must be in a foreign country, and you must be one of the following:

  • A U.S. citizen who is a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax year, or
  • A U.S. resident alien who is a citizen or national of a country with which the United States has an income tax treaty in effect and who is a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax year, or
  • A U.S. citizen or a U.S. resident alien who is physically present in a foreign country or countries for at least 330 full days during any period of 12 consecutive months.

U.S. Citizens may exclude their foreign income from U.S. taxation up to an annual dollar limit ($100,800 for 2015). This exclusion is applied by presenting their employer with a completed Form 673 Statement for Claiming Exemption From Withholding on Foreign Earned Income Eligible for the Exclusion(s) Provided by Section 911.

U.S. citizens may claim additional allowances on their Form W-4, Employee’s Withholding Allowance Certificate, if they expect to take a credit or deduction on their annual U.S. tax return for foreign taxes paid.

Individuals who receive compensation for working abroad, while maintaining tax residency status in their home state, are subject to the income tax laws of that state.  Check with your individual state for specific residency requirements.   For information on PA residency, click here.

Helpful Resources

Foreign Earned Income Exclusion
Foreign Housing Exclusion or Deduction
Foreign Tax Credit – Choosing To Take Credit or Deduction
Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad
Determining Residency for PA Personal Income Tax Purposes

Foreign Persons

Foreign Persons working outside the United States are not subject to U.S. taxation of their wages or fellowship. Tax withholding and reporting must be adjusted to meet the specific circumstance.