Tax
FEIE (Foreign Earned Income Exclusion)
Also known as: Foreign Earned Income Exclusion, Section 911 Exclusion, Form 2555 Exclusion
FEIE is the US tax provision that prevents most US citizens working abroad from being taxed twice on the same earned income. Codified in 26 U.S.C. § 911 and indexed for inflation, the 2026 exclusion ceiling is $132,900 per qualifying individual (up from $130,000 in 2025). A second piece, the Foreign Housing Exclusion or Deduction, allows additional exclusion of qualified housing costs above a base amount, with city-specific caps (Geneva, Hong Kong, London, Singapore, etc., have higher caps reflecting cost of housing).
Qualifying tests (only one needs to be met):
• Bona Fide Residence Test — taxpayer is a tax resident of a foreign country for an uninterrupted period that includes a full tax year (1 Jan to 31 Dec for calendar-year filers). Must intend to remain abroad indefinitely; trips back to the US are allowed but cannot break the bona-fide-residence character.
• Physical Presence Test — taxpayer is physically present in foreign countries for at least 330 full 24-hour days in any rolling 12-month period. Days in transit, on US-based duty, in international waters, or on US military bases generally don't count. Allowed test period straddles tax years.
FEIE excludes EARNED income only — wages, salaries, self-employment net income, professional fees. It does NOT exclude passive income (dividends, interest, capital gains, rents), pension income, US-source income, or income earned working for the US government. Crucially, FEIE does NOT exempt the taxpayer from US Social Security and Medicare taxes (FICA) or self-employment tax (SE tax) on the same income — the exclusion is income-tax-only.
Mechanics: claimed on Form 2555 attached to Form 1040. The taxpayer can also claim the Foreign Tax Credit (Form 1116) on income above the FEIE ceiling. For self-employed expats, FEIE plus a foreign-incorporated entity is sometimes used to avoid SE tax, but this triggers PFIC, GILTI, and Form 5471 complexities — competent advice essential.
Sources
Last factual review: 2026-05-08.
Related terms
Foreign Tax Credit (FTC)
The Foreign Tax Credit lets US citizens and resident aliens reduce their US tax liability dollar-for-dollar by income taxes already paid to foreign governments on the same income. Claimed on IRS Form 1116, it prevents double taxation on income above the FEIE ceiling and on passive income that FEIE doesn't cover. The credit is per-category, capped at the US tax otherwise due on the foreign-source income, with 10-year carryforward and 1-year carryback for unused credits.
Tax Residency
Tax residency determines which country has primary right to tax your worldwide income. Each country sets its own tests — typically based on physical presence (often 183+ days/year), domicile, primary economic interests, or family ties. Holding a residence permit does not automatically establish tax residency, and tax residency does not require a residence permit. Dual tax residency is resolved by tax-treaty tie-breaker rules.
IRS Streamlined Filing Compliance Procedure
The IRS Streamlined Filing Compliance Procedure is the standard remedial pathway for US persons who failed to file FBARs, Form 8938, or income tax returns reporting foreign income — provided their non-compliance was non-wilful. The Streamlined Foreign Offshore Procedure (SFOP), for taxpayers living abroad, requires 3 years of amended/late tax returns + 6 years of FBARs + a non-wilfulness statement. Penalty: zero on SFOP if non-wilfulness is established.
Double Taxation
Double taxation occurs when the same income or capital is taxed twice — typically once by the source country (where the income arises) and once by the residence country (where the recipient is tax resident). It's prevented by tax treaties (which allocate taxing rights) and by domestic relief mechanisms like the foreign tax credit and the foreign earned income exclusion. Unrelieved double taxation is rare in modern tax systems but can still occur with non-treaty-partner countries.
Deeper guides
FEIE vs. Foreign Tax Credit in 2026: Which Saves You More? ($132,900 Exclusion)
2026 FEIE raised to $132,900. Compare the Foreign Earned Income Exclusion and Foreign Tax Credit with worked examples by income level. Includes FBAR and FATCA requirements.
US Expat Tax Guide 2026: FEIE $132,900, FTC, and Zero-Tax Strategies
Comprehensive 2026 US expat tax guide. FEIE exclusion: $132,900 (single) / $265,800 (married). Combined with standard deduction: $149,000 zero-tax threshold. FTC, self-employment tax, Totalization Agreements, and destination tax regimes (Beckham Law, Impatriate, IFICI) explained.
Digital Nomad Tax Guide 2026: FEIE, FTC, and Country-Specific Strategies
Double taxation, tax treaties, FEIE, Foreign Tax Credits, and country-specific tax regimes — the complete 2026 tax guide for digital nomads.
US State Taxes After Moving Abroad: Which States Follow You (and How to Break Free)
California, New York, Virginia, South Carolina, and New Mexico pursue expats for state taxes after moving abroad. The FEIE does NOT protect you. Here's the 7-step checklist to cleanly break state tax residency before you leave — plus the self-employment tax trap that catches freelancers even with FEIE.
Trump's Big Beautiful Bill & Expat Taxes: What Actually Changed (and What Didn't)
The One Big Beautiful Bill is the biggest US tax overhaul since 2017 — but residence-based taxation was left out. FEIE rises to $132,900, estate exemption hits $15M, and a 1% remittance tax begins. What it all means for Americans abroad.
US Renunciation Fee Just Dropped to $450 — Here's What Americans Abroad Need to Know
The State Department is cutting the renunciation fee from $2,350 to $450 on April 13, 2026. But the exit tax on assets over $2M is the real cost. FEIE ($132,900) may make renunciation unnecessary. Full breakdown of who benefits, what you lose, and alternatives.