--- title: "Foreign Earned Income Exclusion: Complete Guide" description: "How the FEIE works for US expats in 2026. Qualification tests, the $132,900 exclusion limit, housing exclusion, and MAGI impacts explained." canonical_url: "https://www.themoneypocket.com/articles/foreign-earned-income-exclusion-guide" last_updated: "2026-07-02T13:57:49.492Z" --- If you are a US citizen or resident earning income abroad, the **foreign earned income exclusion (FEIE)** is likely the most important tax provision in your return. For 2026, you can exclude up to **$132,900** of foreign earned income from US federal income tax — but only if you meet strict qualification tests and file the right forms. Use the [FEIE Calculator](/tools/feie-calculator) to estimate your exclusion and tax savings. ## Who Can Claim the FEIE? The FEIE is available to US citizens and resident aliens who: 1. Have a **tax home** in a foreign country 2. Earn **foreign source income** from personal services (wages, salary, self-employment) 3. Meet either the **bona fide residence test** or the **physical presence test** The exclusion does **not** apply to investment income, pensions, rental income, or US-source wages — only earned income from foreign sources. ## The Two Qualification Tests ### Physical Presence Test You must be physically present in a foreign country for **at least 330 full days** during any 12-month period that includes part of the tax year. Key details: - A "full day" is 24 hours starting at midnight - Days traveling between foreign countries count - Days in the US generally do not count - You can straddle two calendar years with a 12-month period This is the more common test for contractors, consultants, and workers on temporary foreign assignments. ### Bona Fide Residence Test You must be a **bona fide resident** of a foreign country for an entire tax year (January 1 through December 31). This requires: - Establishing a genuine home in the foreign country - No definite intent to return to the US - Potentially paying taxes to the foreign country This test suits permanent expats who have fully relocated abroad. ## 2026 Exclusion Amount The IRS indexes the FEIE annually. For tax year 2026:
Year Maximum Exclusion
2026 $132,900
2025 $130,000
Each qualifying taxpayer claims their own exclusion. Married couples where both spouses work abroad can each exclude up to $132,900 if both qualify independently. ## Housing Exclusion Beyond the earned income exclusion, you may also exclude **foreign housing costs** above a base amount. The housing exclusion covers: - Rent and utilities - Real estate taxes (if renting) - Household repairs and maintenance - Residential parking The exclusion is calculated on Form 2555 and varies by location. High-cost cities like London, Tokyo, and Hong Kong have higher base amounts. **Combined limit:** Your total exclusion (earned income + housing) cannot exceed your total foreign earned income. ## FEIE and Your Tax Return ### Form 2555 You must file **Form 2555 (Foreign Earned Income)** with your tax return to claim the exclusion. The form documents: - Which qualification test you meet - Your foreign earned income - Housing exclusion calculation (if applicable) - Travel days and foreign residency timeline ### Self-Employment Tax FEIE excludes income from **income tax** but not from **self-employment tax**. Self-employed expats still owe Social Security and Medicare taxes on net self-employment income unless a totalization agreement applies. ## MAGI and Other Tax Impacts Excluded foreign earned income is **added back** when calculating Modified Adjusted Gross Income for: - Roth IRA contribution limits - Premium tax credit (ACA subsidies) - Net Investment Income Tax thresholds - Education credit phase-outs This means FEIE can reduce your income tax but may not help with benefits tied to MAGI. Use our [MAGI Calculator](/tools/magi-calculator) to see the full impact. ## FEIE vs. Foreign Tax Credit You cannot claim both the FEIE and the foreign tax credit on the same income. Choose the more beneficial option:
Situation Better Choice
Working in UAE, Singapore, or other low-tax country FEIE
Working in UK, Germany, Japan, or other high-tax country Foreign Tax Credit
Income above exclusion limit FTC on excess, or partial FEIE
Some taxpayers use FEIE on earned income and FTC on other foreign-source income — but not on the same dollars. ## Common Expat Tax Mistakes **Not tracking travel days:** Missing the 330-day threshold by even a few days disqualifies you for the entire exclusion. **Assuming employer withholding covers it:** Your employer may not know you qualify for FEIE. You may need to adjust withholding or make estimated payments. **Forgetting state taxes:** Some states (California, Virginia, New Mexico) tax worldwide income even for residents abroad. FEIE only applies to federal tax. **Missing FBAR and FATCA:** Separate from FEIE, US persons with foreign accounts over $10,000 must file FinCEN Form 114 (FBAR). Foreign assets may trigger Form 8938 (FATCA). ## Planning Tips for Expats - Keep a **travel log** with entry/exit dates for every country - File Form 2555 even if you owe no US tax — it documents your exclusion claim - Review FEIE vs. FTC annually as income and foreign tax rates change - Consider the **foreign housing exclusion** if rent is a major expense - Coordinate with foreign tax filings to avoid double taxation ## Key Takeaways - 2026 FEIE limit: **$132,900** per qualifying taxpayer - Must meet physical presence (330 days) or bona fide residence test - Housing exclusion provides additional benefit for qualifying expenses - File **Form 2555** — the exclusion is not automatic - Excluded income is added back for MAGI purposes - Choose FEIE or foreign tax credit — not both on the same income --- **Related tools:** [FEIE Calculator](/tools/feie-calculator) | [MAGI Calculator](/tools/magi-calculator) | [Federal Tax Bracket Calculator](/tools/federal-tax-bracket-calculator)