Glossary

Foreign Earned Income Exclusion (FEIE)

Definition

The foreign earned income exclusion lets qualifying U.S. citizens and residents living abroad exclude a limited amount of foreign earned income from U.S. income tax. The maximum is adjusted for inflation each year.

Who may qualify

A taxpayer must have a tax home in a foreign country, earn income from work performed abroad, and meet either the bona fide residence test or the physical presence test of 330 full days in a 12-month period.

How it is claimed

The exclusion is elected on Form 2555 with a timely filed return. It applies to earned income such as wages or self-employment income, not to passive income such as dividends or interest.

Limits to keep in mind

It does not generally remove self-employment tax.
Excluded income may affect the use of certain credits and deductions.
A taxpayer cannot claim a foreign tax credit for taxes attributable to excluded income.
Revoking the election can have lasting effects.

Practical example

For example, suppose Marcus, a U.S. citizen, works for a local employer in Portugal and is physically in foreign countries for 330 full days in a 12-month period. He may qualify to exclude part or all of his foreign salary by filing Form 2555.

General information, not tax advice

This page provides general educational information about U.S. federal tax rules. It is not individualized tax, legal or accounting advice, and it does not create a client relationship. Results depend on each taxpayer's specific facts.

Written by Roger I. Chirino, founder of Chirino USA Accountants & Advisors P.A.

Supported by licensed CPAs, IRS Enrolled Agents (EAs), and experienced U.S. tax professionals focused on cross-border compliance and planning.

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