Air Hostess & Pilots-Tax Implication

Americans working abroad are eligible to foreign earned income exclusion under specific requirements. First, the U.S. has to have a tax treaty with the foreign nation. In addition, the U.S. taxpayer has to maintain a “tax home” in the foreign country, and pass either the Bona Fide Residence Test, or the Physical Presence Test (U.S. Department of the Treasury, 2016c). One of the most important aspects in qualifying for the foreign earned income exclusion is that one must earn income in a foreign country.

However, how should pilots and air hostess be taxed? They perform services in airspaces that fly above foreign countries. If the airspace is flying over the Atlantic Ocean on the way to Europe, are the pilots and flight attendants in the airspace performing service in a foreign country? The courts have determined that international waters are not a “foreign country” in terms of taxation. Therefore, pilots and flight attendants in an aircraft travelling above international waters are not performing services in a foreign country (Jeker, 2012).

For the US tax purposes, a foreign country includes the foreign country itself, territorial waters around the foreign country, and the airspace above the foreign country and its territorial waters (U.S. Department of the Treasury, 2016c). Therefore, pilots and flight attendants need to carefully determine how much time of their labor is eligible for foreign earned income exclusion.

Apportionment is done by distinguishing the income earned in a foreign country and income earned in places that do not qualify as a foreign country. Only the income earned in a foreign country is eligible for the foreign earned income exclusion. The criteria used to distinguish the two is time. The formula is {(Total time worked in and over foreign countries) / (Total time worked)} * (Total wages earned). In order to claim the foreign earned income credit and avoid audits, a pilot or flight attendant should keep a record of hours of services meticulously. One could also ask for an access to actual flight plan which would show exact time spent in different locations (Jeker, 2012).


Jeker, V. L., JD. (2012, December 3). International Pilots and Crew – How to Determine Foreign Earned Income. Retrieved from

U.S. Department of the Treasury. Internal Revenue Service. (2016c). U.S. Citizens Performing Services in Foreign and International Airspace. Retrieved from

Jake Song-Master's Degree in Accounting Student at Naveen Jindal School of Management

and is in the 2017 mentoring program at IAA CPA FIRM PLLC

This information is for educational purposes, its not a substitute for consultation with a tax practitioner.If you have any questions contact IAA CPA FIRM PLLC

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