Foreign Earned Income Exclusion (FEIE) for US Expats

What the FEIE actually excludes

For tax year 2024, you can exclude up to $126,500 of foreign earned income from US federal income tax. Married couples both abroad can each claim it — up to $253,000 combined.

You must pass one of two tests

1. Physical Presence Test — present in foreign country/countries 330 full days within any 12-month period
2. Bona Fide Residence Test — established residence in a foreign country for an uninterrupted period including a full tax year

What qualifies as 'foreign earned income'

• Wages from a foreign employer
• Self-employment income from work performed abroad
• Salary from a US employer if you're working physically outside the US

Does NOT include: investment income, dividends, capital gains, pensions, Social Security, US-source wages.

FEIE vs Foreign Tax Credit (FTC)

If you live in a high-tax country (UK, Germany, Australia), the FTC usually beats the FEIE — your foreign tax fully offsets US tax with no income cap. In a low-tax country (Singapore, UAE, parts of Asia), FEIE usually wins. Most expats benefit from a mix.

Housing exclusion stacks on top

You can also exclude foreign housing costs above a base amount (~$20,240 in 2024), up to capped maximums that vary by city. Reported on the same Form 2555.

You still have to file

The FEIE doesn't reduce filing requirements. US citizens and resident aliens must file Form 1040 every year if income exceeds the standard deduction (counting FEIE income before the exclusion). Don't forget FBAR (FinCEN 114) for foreign accounts.

State tax doesn't go away automatically

States like California treat residents abroad as still resident for tax purposes unless they sever ties. Moving overseas often requires changing state domicile first — see our state residency guide.