# Parental leave and FEIE/FTC



## Alltimegreat1 (Feb 25, 2015)

I'm a US citizen living in Germany. I'm planning on taking parental leave from April to November this year, during which I will receive 65% of my net pay. I'm wondering how to report this income to the IRS. Does the US government view this as earned income which can excluded on the foreign earned income exclusion (Form 2555)? I'm really lost here so any help would be greatly appreciated.


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## Bevdeforges (Nov 16, 2007)

It won't come into question until you do your filing for 2015 (in early 2016), but if you're receiving your parental leave from your employer, it should count as "earned income" and be reported that way. (So yes, subject to the FEIE.)
Cheers,
Bev


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## jbr439 (Nov 17, 2013)

Bevdeforges said:


> It won't come into question until you do your filing for 2015 (in early 2016), but if you're receiving your parental leave from your employer, it should count as "earned income" and be reported that way. (So yes, subject to the FEIE.)
> Cheers,
> Bev


In Canada, EI (employment insurance - a government program that employee and employer pay into) pays maternity and paternity leave benefits (employer may top that up). So, out of curiosity, would EI payments be considered "earned income"? I'm thinking not.


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## BBCWatcher (Dec 28, 2012)

I don't see why they wouldn't be treated as earned income. The payor doesn't make a whole lot of difference.


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## Bevdeforges (Nov 16, 2007)

BBCWatcher said:


> I don't see why they wouldn't be treated as earned income. The payor doesn't make a whole lot of difference.


I had a feeling someone might ask that. <g> Actually, there is something in the IRS publication on what is and isn't income that leads me to believe that state-paid benefits such as this are not considered income and thus not even declarable. However to be safe, you'd report it as "earned income" and exclude it along with your salary as long as it all falls under the limit.

I "accidentally" did something like this a few years ago and the IRS seemed to have no problem with it. Have only just recently discovered the text in the various IRS publications that justifies the treatment.
Cheers,
Bev


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## Alltimegreat1 (Feb 25, 2015)

Bevdeforges said:


> It won't come into question until you do your filing for 2015 (in early 2016), but if you're receiving your parental leave from your employer, it should count as "earned income" and be reported that way. (So yes, subject to the FEIE.)
> Cheers,
> Bev


Thanks for the response. I should have mentioned in the original post that parental leave pay in Germany is paid exclusively by the government and not at all by the employer.


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## BBCWatcher (Dec 28, 2012)

It gets complicated when the employer is the government then.


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## jbr439 (Nov 17, 2013)

Bevdeforges said:


> I had a feeling someone might ask that. <g> Actually, there is something in the IRS publication on what is and isn't income that leads me to believe that state-paid benefits such as this are not considered income and thus not even declarable. ...


So, government paid unemployment benefits (this time for losing one's job, not for parental leave) are also at worst earned income and at best non-declarable? I always thought they were considered unearned income.


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## Bevdeforges (Nov 16, 2007)

jbr439 said:


> So, government paid unemployment benefits (this time for losing one's job, not for parental leave) are also at worst earned income and at best non-declarable? I always thought they were considered unearned income.


You can find tax advisers online who will say flat out that unemployment benefits are not to be declared. If you look in the instructions (Pub 17, for example) you'll see all sorts of statements that "unemployment compensation" is considered income, whether State or Federal. However foreign unemployment compensation isn't paid by a US State, nor is it paid by the Federal Government. 

Furthermore, if you get the Publication 525, which defines taxable and nontaxable income, there is a statement about Welfare and Other Public Assistance Benefits that says those are not includable in income. (Following closely after the section on Unemployment Compensation which spells out all the various types of unemployment benefits in the US, but says not a word about foreign benefits, which seem to be more a form of "public assistance benefits.") p 27 in the 2014 edition if you want to have a look for yourself.
Cheers,
Bev


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