Legal Definitions - blocked income

Blocked income refers to money earned by a foreign taxpayer that is not subject to U.S. taxation because the foreign country prohibits changing the income into dollars. For example, if a foreign worker earns money in their home country and cannot convert it to U.S. dollars, that income is considered blocked income.

Example: A foreign worker earns $10,000 in their home country but cannot convert it to U.S. dollars due to government restrictions. This $10,000 is considered blocked income and is not subject to U.S. taxation.

This example illustrates how blocked income is money earned by a foreign taxpayer that cannot be converted to U.S. dollars and is therefore not subject to U.S. taxation.