Tax benefits for U.S. individuals working in Iraq.

U.S. sanctions prohibiting trade with Iraq also caused uncertainty as to claiming a Sec. 911 foreign-earned-income exclusion. These sanctions are still in force; however, the IRS has confirmed in Notice 2003-52 that U.S. civilians working in Iraq can claim the tax benefits of living abroad while supporting the U.S.'s efforts there.

Foreign-Earned-Income Exclusion

Sec. 911(a) allows a "qualified individual" to elect to exclude from income "foreign earned income" (as defined in Sec. 911(b)) and "housing cost amount" (as defined in Sec. 911 (c)). Sec. 911 (d) defines a qualified individual as a U.S. citizen or resident whose tax home is a foreign country and who meets certain other requirements.

Certain Licensees

The IRS noted that an individual must be working on a contract licensed by Treasury's Office of Foreign Assets Control...