No capital gains tax after standard deduction and FEIE??
Hey there,
I would really appreciate an expert comment on a tax question I just can’t seem to find a definitive answer to and I can’t be the only one with this confusion. Thanks in advance!
My question is regarding the combination of FEIE and the standard deduction. My form1040 is currently as follows:
Line 1h (foreign earned income): $105,000
Line 3b: $26 (qualified dividends)
Line 7a: $1199 (short-term capital gains)
Line 8 would be my foreign income excluded by FEIE so -$105.000 (negative value)
Line 9 is the sum of Capital gains, Dividends and FEIE-excluded income (negative Value) -> $1225
Line 11a: $1225 (adjusted gross income)
Line 14: my standard deduction for 2025 is $15,750
Line 15: that would mean my taxable income is a negative Value, so $0
Line 16: So is my tax on my Capital gains and Dividends really $0?
I am aware of the „stacking rule“, where excluded foreign income is unexcluded to define the total tax bracket. But I Read that the stacking rule only applies to taxable income remaining AFTER the standard deduction. So e.g. I had $20,000 capital gains and therefore an adjusted gross income of $20,000 after FEIE exclusion of foreign earned income.
So is it true that in my case no tax on capital gains and dividends is due, thanks to them being smaller than the deductions?
Thanks to anyone reading all of that!