What is Foreign Earned Income Exclusion?
Allows qualifying US expats to exclude foreign earned income from US taxation — $126,500 (2024), $130,000 (2025), $132,900 (2026). See our complete FEIE Guide for details.
Definition
The Foreign Earned Income Exclusion (FEIE) under IRC Section 911 allows US citizens and resident aliens living abroad to exclude a portion of their foreign earned income from US federal income tax. The IRS adjusts the exclusion amount annually for inflation: $120,000 (2023), $126,500 (2024), $130,000 (2025), and $132,900 (2026). To qualify, you must have a tax home in a foreign country and meet either the bona fide residence test (established residence in a foreign country for an uninterrupted period that includes a full tax year) or the physical presence test (physically present in a foreign country for at least 330 full days during any 12-month period). The exclusion applies only to earned income — wages, salaries, professional fees, and self-employment income. It does not cover investment income, pensions, or Social Security benefits. Married couples filing jointly where both spouses work abroad can each claim the full exclusion. You elect the FEIE by filing Form 2555 with your tax return.
Exclusion Amounts by Tax Year
| Tax Year | Maximum Exclusion |
|---|---|
| 2023 | $120,000 |
| 2024 | $126,500 |
| 2025 | $130,000 |
| 2026 | $132,900 |
Source: IRS Revenue Procedures. Amounts are adjusted annually for inflation.
Expert Tips
You can claim the FEIE and the Foreign Housing Exclusion together to shelter even more income from US tax.
Self-employment tax (15.3%) still applies to excluded income unless a totalization agreement exists between the US and your country of residence.
If you revoke the FEIE, you cannot re-elect it for 5 years without IRS approval. Think carefully before switching to the Foreign Tax Credit.
The physical presence test uses any consecutive 12-month period, not just the calendar year. Pick the period that maximizes your qualifying days.
Who Needs to Know This?
US citizens and resident aliens living and working abroad who meet either the bona fide residence test (established residence for a full tax year in a foreign country) or physical presence test (330 full days abroad in any 12-month period). Also relevant for digital nomads, remote workers employed by US companies while overseas, and self-employed expats.
Key Deadline
Claimed on annual tax return using Form 2555. If you need more time to meet the physical presence test, you can request an extension. Late elections are generally allowed if filed within 1 year of the original due date.
Potential Penalties
No penalty for not claiming the FEIE — but failing to file Form 2555 means you lose the exclusion entirely and may owe thousands in avoidable US taxes on your foreign earnings.
Related Forms
Common Mistakes to Avoid
- 1Thinking you can use both FEIE and Foreign Tax Credit on the same income (you must choose one per dollar of income)
- 2Not meeting the physical presence test correctly — you need 330 full days, and partial days do not count
- 3Including non-qualifying income like investment income, rental income, pensions, or capital gains in the exclusion
- 4Revoking the FEIE election without understanding the 5-year lockout period before you can re-elect
- 5Forgetting that self-employment tax still applies even when income is excluded under FEIE
- 6Not claiming the Foreign Housing Exclusion in addition to FEIE when eligible
Related Terms
Helpful Resources
Expat Tax Filing Services
Our EAs and CPAs handle Form 2555 and FEIE elections for US expats in 50+ countries.
Expat Tax Obligation Checker
Free tool to determine if you qualify for the FEIE based on your living situation.
Complete FEIE Filing Guide
Step-by-step guide covering qualification tests, Form 2555, and optimization strategies.
Book a Free Consultation
Talk to an expat tax specialist about your FEIE eligibility and potential savings.
Harsh Agarwal, EA · IRS Enrolled Agent
Reviewed for accuracy by Zenith Financial Advisors
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