Understanding the Foreign Earned Income Exclusion (FEIE): What Every Expat Should Know

If you’re a U.S. citizen or green card holder living abroad, you’re still required to file a U.S. tax return — even if you pay taxes in your country of residence. However, the IRS offers several provisions that help reduce double taxation, and one of the most valuable is the Foreign Earned Income Exclusion (FEIE).

What Is the FEIE?

The FEIE allows eligible U.S. taxpayers living overseas to exclude a portion of their foreign-earned income from U.S. taxation. For the 2024 tax year, the exclusion amount is up to $126,500 per qualifying person.

Who Qualifies?

To claim the FEIE, you must meet:

• The Bona Fide Residence Test (living in a foreign country for an entire tax year), or

• The Physical Presence Test (present in a foreign country for at least 330 full days in a 12-month period).

What Can You Exclude?

The exclusion applies to income earned from employment or self-employment abroad. It does not apply to income such as dividends, capital gains, or pensions.

Why It Matters

For expats, the FEIE can significantly lower your U.S. tax bill. However, it must be correctly claimed using Form 2555. Mistakes or ineligibility can lead to penalties or delayed processing.

Working with an expat tax specialist ensures your filing is accurate, compliant, and optimized for the best outcome.