FEIE Calculator: Foreign Earned Income (2026)

1. What Is the Foreign Earned Income Exclusion (FEIE)?

The Foreign Earned Income Exclusion (FEIE) is a provision of the US tax code — specifically IRC Section 911 — that allows qualifying US citizens and resident aliens living abroad to exclude a certain amount of their foreign earned income from US federal income tax.

The United States is one of only two countries in the world (the other being Eritrea) that taxes its citizens on worldwide income regardless of where they live. Even if you move to Portugal, Thailand, or the UAE and never set foot in the US for years, you're still required to file a US tax return and report all your income. The FEIE exists to mitigate this burden by letting you exclude a significant portion of your foreign earnings from taxation.

For the 2025 tax year, the maximum FEIE exclusion amount is $130,000. This amount is adjusted annually for inflation. The 2026 amount has not yet been officially announced by the IRS — it is expected to be approximately $132,000-$134,000 based on inflation trends, but you should check the IRS website or consult a tax professional for the confirmed 2026 figure when it is published.

2. Who Qualifies for the FEIE?

To claim the FEIE, you must meet all of the following requirements:

1. You must have foreign earned income — income from services you performed while physically located in a foreign country.
2. Your tax home must be in a foreign country — your regular or principal place of business must be outside the United States.
3. You must meet one of two qualifying tests: the Physical Presence Test or the Bona Fide Residence Test.

The Physical Presence Test

You must be physically present in a foreign country (or countries) for at least 330 full days during a consecutive 12-month period. Key details:

• The 12-month period does not have to align with the calendar year. You can choose any consecutive 12-month period that works in your favor.
• 330 full days means 330 complete 24-hour periods (midnight to midnight) spent outside the United States. Partial days in the US count as US days, not foreign days.
• The 35 remaining days (365 - 330 = 35) can be spent in the US or in transit. This gives you about 5 weeks of US time per year.
• Travel days between the US and a foreign country count as neither — if you fly from New York to London and the flight crosses midnight, the day you depart the US is a US day and the day you arrive is a foreign day.
• You do not need to be in a single foreign country. Time spent in multiple foreign countries counts. You could spend 100 days in Portugal, 100 days in Thailand, and 130 days in Mexico, and you've met the 330-day test.

The Bona Fide Residence Test

You must be a bona fide resident of a foreign country for an uninterrupted period that includes at least one full tax year (January 1 through December 31). This is a facts-and-circumstances test that considers:

• Your intention to remain in the foreign country
• The nature and duration of your stay
• Whether you established a home in the foreign country
• Your participation in the community (bank accounts, memberships, social ties)
• The type of visa or residence permit you hold
• Whether you returned to the US for temporary visits or permanently

The Bona Fide Residence Test is more subjective than the Physical Presence Test. It doesn't have a strict day-count requirement, but you must demonstrate genuine residence in a foreign country — not just passing through or living as a perpetual tourist.

One advantage of the Bona Fide Residence Test: short trips back to the US don't disqualify you, as long as they're temporary. Under the Physical Presence Test, every US day counts against your 330-day requirement.

3. How to Calculate Your FEIE

The calculation is straightforward in concept:

Taxable income = Gross foreign earned income − FEIE exclusion (up to $130,000 for 2025)

Let's walk through examples at different income levels:

Example 1: Income of $80,000

• Foreign earned income: $80,000
• FEIE exclusion: $80,000 (limited to your actual income since it's below the max)
• Taxable foreign earned income: $0
• Result: Your entire foreign earned income is excluded. You owe zero US federal income tax on this income.

Example 2: Income of $130,000

• Foreign earned income: $130,000
• FEIE exclusion: $130,000 (equals the maximum)
• Taxable foreign earned income: $0
• Result: You exclude the maximum amount. Zero US tax on this income.

Example 3: Income of $200,000

• Foreign earned income: $200,000
• FEIE exclusion: $130,000 (the maximum for 2025)
• Taxable foreign earned income: $70,000
• Result: You're taxed on $70,000 of foreign earned income. But note: under the "stacking" rule, the $70,000 is taxed at the rate that would apply if you had $200,000 of income — not at the lower rates that would apply to the first $70,000 of income. This means your effective rate on that $70,000 is higher than you might expect.

4. What Counts as Foreign Earned Income?

Qualifies for FEIE:

• Wages and salaries earned while working abroad
• Self-employment income from services performed abroad
• Professional fees earned abroad
• Tips received abroad
• Bonuses attributable to foreign work
• Housing allowances provided by an employer

Does NOT qualify for FEIE:

• Investment income — interest, dividends, capital gains, rental income (even from foreign properties)
• Pension or annuity payments — including foreign pensions
• Social Security benefits
• US government pay — military pay, government civilian pay (special rules apply)
• Income earned in the US — even if you're a foreign resident, income from US-source work doesn't qualify
• Amounts received after the tax year following the year in which services were performed

The key distinction: FEIE covers earned income from personal services performed abroad. Passive income, investment income, and US-source income are all excluded from the FEIE. If you're a SaaS founder living abroad, your salary or self-employment income from running the business qualifies (assuming you perform the work while physically abroad), but dividend income from your company does not.

5. The Foreign Housing Exclusion

In addition to the $130,000 income exclusion, the FEIE includes a Foreign Housing Exclusion (for employees) or Foreign Housing Deduction (for self-employed individuals) that can further reduce your taxable income.

How it works

The housing exclusion allows you to exclude (or deduct) certain housing expenses that exceed a base amount. The calculation:

1. Qualifying housing expenses: rent, utilities, insurance, parking, furniture rental, and repairs for your foreign home
2. Base housing amount: 16% of the FEIE maximum, prorated for the number of qualifying days in the year. For 2025: 16% × $130,000 = $20,800 (for a full year)
3. Housing exclusion = Qualifying expenses − Base amount (subject to a maximum)
4. Maximum housing exclusion: Generally 30% of the FEIE maximum ($39,000 for 2025), though certain high-cost cities (London, Tokyo, Hong Kong, etc.) have higher limits published annually by the IRS

Example

You live in London. Your annual rent and utilities total $42,000. Base housing amount: $20,800. Housing exclusion: $42,000 − $20,800 = $21,200. This $21,200 is excluded from your income on top of the $130,000 FEIE — for a total exclusion of $151,200.

6. Filing Requirements: Form 2555

To claim the FEIE, you must file Form 2555 (Foreign Earned Income) with your US federal tax return. Key points:

• You must file a tax return even if your entire income is excluded. The FEIE is an exclusion that you must affirmatively claim — it is not automatic.
• Form 2555 must be filed with a timely return (including extensions). If you fail to file, you may lose the ability to claim the exclusion for that year.
• Automatic extension for expats: US citizens and residents living abroad get an automatic 2-month extension (to June 15) for filing, and can request an additional extension to October 15. You can also apply for an additional extension to December 15 if needed to meet the Physical Presence Test.
• Once elected, the FEIE applies until revoked. If you claim the FEIE one year and then choose not to claim it the next year, you are considered to have "revoked" the election. You cannot re-elect the FEIE for 5 years without IRS approval.

FEIE vs. Foreign Tax Credit

You cannot claim both the FEIE and the Foreign Tax Credit (FTC) on the same income. If you exclude income under the FEIE, you cannot also claim a credit for foreign taxes paid on that same income. However, if your income exceeds the FEIE limit, you can claim the FTC on the income above the exclusion.

For some expats, particularly those living in high-tax countries (France, Germany, UK, Japan), the Foreign Tax Credit may actually be more beneficial than the FEIE, because the foreign taxes paid may exceed the US tax on the same income. The decision between FEIE and FTC (or a combination) depends on your specific income level, the foreign tax rate, and your personal situation.

7. Common Mistakes with the FEIE

• Not meeting the 330-day test. The most common disqualifier. You counted travel days as foreign days, or you spent 40 days in the US instead of 35. One day over the limit and you lose the entire Physical Presence Test for that period.
• Counting partial days as foreign days. If you were in the US for any part of a day, that's a US day. The midnight-to-midnight rule is strict.
• Trying to exclude investment income. The FEIE only applies to earned income from services performed abroad. Dividends, capital gains, rental income, and interest are never eligible.
• Not filing Form 2555. The exclusion is not automatic. You must file the form with a timely return (including extensions).
• Revoking the election accidentally. If you claim the FEIE one year and then don't claim it the next, you've revoked it and can't re-elect for 5 years. If your situation changes, consult a tax professional before dropping the FEIE.
• Ignoring the stacking rule. High earners assume they'll be taxed on excess income at low rates. The stacking rule means the excess is taxed at higher marginal rates.
• Forgetting self-employment tax. The FEIE reduces income tax but does NOT reduce self-employment tax. If you're self-employed abroad, you still owe Social Security and Medicare taxes (15.3%) on your net self-employment income, even if it's fully excluded under the FEIE. Some Totalization Agreements with specific countries may exempt you from US self-employment tax.
• Using the wrong 12-month period. For the Physical Presence Test, you can choose any 12-month period — it doesn't have to be the calendar year. Choose the period that maximizes your qualifying days.

8. FEIE for Digital Nomads and SaaS Founders

The FEIE is particularly valuable for US citizens who are digital nomads, remote workers, or SaaS founders living abroad. Here's how it typically applies:

Self-employed SaaS founders

If you run a SaaS business and perform all your work while physically located outside the US, your self-employment income qualifies for the FEIE (up to the maximum). However:

• You still owe self-employment tax (Social Security + Medicare at 15.3%) on the first ~$168,600 of net self-employment income (2025 wage base), regardless of the FEIE
• Income above the FEIE exclusion limit is taxable at your (stacked) marginal rate
• Investment income (dividends from your company, capital gains from selling equity) is not eligible for the FEIE

Remote employees

If you're a US citizen employed by a US company but working remotely from abroad, your salary qualifies for the FEIE as long as you meet the Physical Presence Test or Bona Fide Residence Test. Your employer will still issue a W-2 and may withhold federal taxes; you claim the FEIE when you file your return and receive a refund of excess withholding.

Choosing where to establish residence

The FEIE reduces your US tax burden, but you may also owe taxes in your country of residence. The best scenario is living in a country with no income tax (UAE, Bahamas, etc.) or a territorial tax system (many Southeast Asian and Caribbean countries). This way, the FEIE eliminates your US tax, and your host country either doesn't tax you or only taxes local-source income.

If you're also considering establishing a US state domicile for when you return, our domicile quiz can help determine the best state, and our Florida Residency Guide covers the most popular choice.

9. 2026 FEIE Exclusion Amount

The FEIE exclusion amount is adjusted annually for inflation using the Consumer Price Index (CPI). Here's the recent history:

The 2026 amount will be published by the IRS in a Revenue Procedure, typically released in the fall of 2025 or early 2026. We'll update this page when the official figure is announced. In the meantime, use $130,000 (the confirmed 2025 amount) for conservative planning and check the IRS website for the updated figure.

10. FEIE vs. Foreign Tax Credit: Which Should You Choose?

This is one of the most important decisions for US expats. The answer depends on your income level and the tax rate in your country of residence:

Choose FEIE when:

• You live in a low-tax or no-tax country (UAE, Bahamas, Paraguay, etc.)
• Your income is at or below the FEIE maximum ($130,000 for 2025)
• You want simplicity — the FEIE is relatively straightforward to calculate

Choose Foreign Tax Credit when:

• You live in a high-tax country (most of Western Europe, Japan, Australia) where foreign taxes exceed US taxes on the same income
• Your income significantly exceeds the FEIE maximum
• You have significant investment income (which isn't eligible for FEIE but can be offset by FTC)

Combine both when:

• You have income above the FEIE maximum — use the FEIE for the first $130,000 and the FTC for the excess
• Your foreign taxes on the excluded income are low, but foreign taxes on remaining income are high

The decision is complex and depends on your individual circumstances. A qualified expat tax professional can model both scenarios and determine which approach minimizes your total tax burden.

This guide is for informational purposes only and does not constitute tax or legal advice. Tax rules for US citizens abroad are complex and depend on individual circumstances. The FEIE exclusion amount for 2025 is $130,000; the 2026 amount has not been confirmed by the IRS at the time of writing. Always consult a qualified tax professional specializing in US expat taxation for advice specific to your situation.