The tax code begins from the premise that ALL income is taxable. This includes illegal income (crime money), income that would not be taxable in the country where you received it (Canadian lottery winnings), etc. Then you look for code sections that will allow you to reduce or exclude some of that income. If you can't find some specific exclusion in the tax code, the income is taxable. Common 'reductions or exclusions' include: the standard deductions & personal exemptions, itemized deductions, exclusion of disability pay & welfare payments, gifts, IRA/401(k) contributions, etc.
There is a foreign earned income exclusion, which allows you to exempt the first $80,000 of inocme earned while you resided in a foreign country, & is figured on Form 2555 or 2555-EZ.
This post does not constitute legal advice, nor does it create an attorney-client relationship. Postings are based only on the information provided and you should consult an attorney in your area before relying on information contained in this post.