Foreign Earned Income Exclusion or FEIE

As a U.S. citizen or resident alien, you are taxed on your worldwide income if you live in a foreign country. However, you could qualify for the Foreign-Earned Income Exclusion (FEIE), reducing your taxable income. This page covers the qualification requirements, foreign earned income exclusion, housing expenses, deductions, and meal and lodging amounts for specific tax years.

What Is Foreign Earned Income?

Foreign earned income is income for services performed in a foreign country while your tax home is there. It qualifies based on meeting the bona fide residence test or physical presence test. Payment method does not affect income's source.

Generally, any income for work done outside the U.S. counts as foreign earned income, even for U.S. companies. Exclusions from this income include:

Previously excluded meals and lodging value
Pay as a U.S. Government employee
Recaptured, unallowable moving expenses
Annuity or pension payments (including Social Security benefits)
Payments received after the tax year in which the services were performed
Amounts included due to employer contributions to a nonexempt employee trust or non-qualified annuity contract.

How Do You Qualify for the FEIE?

To claim the FEIE and/or foreign housing exclusion (deduction), you must meet three requirements:

Your tax home must be in a foreign country.
You must have had foreign-earned income.
You must be one of the following:

A U.S. citizen who is a bona fide resident of one or more foreign countries for an uninterrupted time that includes an entire tax year.
A U.S. resident alien from a country with an income tax treaty with the U.S. and a bona fide resident of a foreign country for the entire tax year.
A U.S. citizen or resident alien physically present in a foreign country for at least 330 full days over 12 consecutive months.

You may also exclude the value of food and housing provided by your employer for their convenience, but these amounts are not considered foreign-earned income.

If you qualify but are unsure what to exclude, see below for breakdowns, then utilize eFile's automatic tax tools. When you file on eFile.com, we handle the calculations so you can enjoy your foreign surroundings.

How to Exclude Foreign Income from Double Taxation?

The maximum foreign income exclusion amount adjusts yearly for inflation. Stay updated on Foreign Earned Income Exclusion limits.

If a married couple works abroad and meets the residency tests, both can choose the FEIE, effectively doubling the exclusion.

If your eligibility for the FEIE is only for part of the year, modify the maximum limit based on qualifying days.

For foreign housing exclusion, calculate this amount first, as it is subtracted from foreign-earned income. When you file on eFile.com, these calculations are automated.

What Is the Foreign Housing Exclusion?

You can deduct employer-paid housing expenses if you work abroad and pass the bona fide residence or physical presence test. The exclusion applies to employer-paid expenses, while the deduction applies to self-employment earnings.

Qualified housing expenses are capped at 30% of the highest foreign-earned income exclusion. The limit depends on location and qualifying days. Review exclusion limits for earned income and housing.

To calculate your foreign housing amount, subtract the base housing amount (found on Form 2555) from your total foreign housing expenses. When you prepare your return on eFile.com, the app performs these calculations for you.

Count reasonable housing expenses for yourself, your spouse, and dependents during the qualifying period, excluding lavish expenses and those related to buying property or improvements.

There is a limit on housing expenses based on location, and they cannot exceed total foreign earned income for the taxable year.

Calculate the foreign housing exclusion before the foreign earned income exclusion. If you exclude foreign housing amounts, you cannot claim a foreign tax credit or deduction for those taxes, or the exclusion may be invalid.

When e-filing, ensure that the foreign housing deduction does not exceed the foreign earned income minus both exclusions. You cannot claim both deductions and exclusions unless self-employed, these deductions lower income tax but not self-employment tax.

Whether e-filing this year or addressing back taxes, the information above should address your questions about obtaining the FEIE and keeping more money in your pocket. See more resources for past-due returns.

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