Exclusion to U.S. income taxes while living in Costa Rica

Discussing payment of taxes, the IRS, or anything remotely related to the U.S. government are not fun topics!  However, knowing what you might owe Uncle Sam as result of working in Costa Rica, owning a business or selling real estate in Costa Rica, is important.  Below are some details on exclusions to income while residing overseas

In order to qualify for the exclusion to income taxes, you must pass three tests:

Your tax home (place where you work) must be in a foreign country
You must have foreign earned income (does not include lodging, meals, fringes)
You must pass either the "bona fide" residence or "physical presence" test in a foreign country.
The "bona fide" residence test is passed if you have a home in a foreign country for at least one uninterrupted tax year. Generally, the tax law anticipates that you have moved to this country with the intention of staying there for a long while. Most people claim the physical presence test instead.

For additional information, get it right from the source: Tax Guide for U.S. Citizens Residing Abroad