How You Can Benefit from Foreign Earned Income Exclusion

The Foreign Earned Income Exclusion (FEIE) allows qualifying U.S. citizens and resident aliens living and working abroad to exclude a certain amount of foreign earned income from U.S. income tax.

1. 2025 FEIE Limit

For tax year 2025, the maximum exclusion is:

$126,500 per qualifying person

This is an increase from the 2024 limit of $120,000 (adjusted annually for inflation).


2. What Qualifies as Foreign Earned Income?

  • Earned income means wages, salaries, professional fees, or other compensation for personal services performed abroad.
  • It must be:
  • Income you actively work for (not passive, like rental or dividend income)
  • The income must be earned while you were physically present in a foreign country.
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3. Who Qualifies for the FEIE?

You must meet all three of the following:

Requirement Description
Tax home in a foreign country Your main place of business, employment, or post of duty is outside the U.S.
Foreign earned income Wages or self-employment income earned outside the U.S.
One of two residency tests You must pass either: a) Bona Fide Residence Test: You're a bona fide resident of a foreign country for an uninterrupted period including an entire tax year b) Physical Presence Test: You're physically present in a foreign country for at least 330 full days in any 12-month period

4. FEIE Limit Applies Per Person

  • If both spouses qualify, each can exclude up to $126,500 (2025), for a total of $253,000
  • You must each file Form 2555


5. Housing Exclusion or Deduction (Add-on Option)

You may also qualify for a foreign housing exclusion or deduction, which can further reduce taxable income.

  • Generally: Qualified housing expenses exceeding 16% of the FEIE limit ($20,240 for 2025) may be excluded up to a cap (depends on city).
  • Some high-cost cities (e.g. Hong Kong, Tokyo, London) have higher limits.


6. FEIE vs. Foreign Tax Credit (FTC)

You cannot use both fully on the same income. But in some cases, you can:4. FEIE Limit Applies Per Person

If both spouses qualify, each can exclude up to $126,500 (2025), for a total of $253,000

Option Good For Notes
FEIE Moderate-income earners abroad in low- or no-tax countries You can only exclude earned income
FTC High earners in high-tax countries You get dollar-for-dollar credit for foreign taxes paid

7. How to Claim FEIE

  • File Form 2555 with your U.S. tax return (Form 1040)
  • Deadline: April 15, or June 15 if you're abroad (with optional Oct 15 extension)