Foreign Earned Income Exclusion Calculator

The FEIE allows qualifying US citizens and resident aliens living abroad to exclude up to $130,000 (2025) of foreign earned income from US federal income tax. This is claimed on Form 2555 and can dramatically reduce or eliminate federal income tax for Americans working overseas.

For 2025, the Foreign Earned Income Exclusion is $130,000 per qualifying individual (IRS Rev. Proc. 2024-40). For 2026 it is $132,900 (IRS Rev. Proc. 2025-32). This amount is adjusted annually for inflation. If you qualify for only part of the year, the exclusion is prorated based on your qualifying days.

You must meet one of two tests: (1) The Bona Fide Residence Test — you must be a US citizen who is a bona fide resident of a foreign country for an uninterrupted period that includes an entire tax year. (2) The Physical Presence Test — you must be physically present in a foreign country for at least 330 full days during any 12-month period. US residents (green card holders) can only use the physical presence test.

The stacking rule means that even though the excluded income isn't taxed, it still affects your tax bracket. Your remaining taxable income is taxed as if the excluded income were stacked below it. For example, if you earn $200,000 and exclude $130,000, the remaining income is not taxed starting at the 10% bracket — it's taxed at the bracket where $130,000 of income would have put you (the 24% bracket).

No. The FEIE only reduces federal income tax. Self-employment tax (Social Security 12.4% + Medicare 2.9% = 15.3%) applies to all net self-employment income regardless of the FEIE. This is a common and costly misconception — self-employed expats should budget for SE tax even with a full FEIE exclusion.

In addition to the FEIE, you can exclude qualifying foreign housing expenses that exceed a base amount (16% of the FEIE limit, or $20,800 for 2025). The maximum housing exclusion is generally 30% of the FEIE limit minus the base amount ($39,000 − $20,800 = $18,200 for 2025). Higher limits apply in designated high-cost cities. If self-employed, this is a deduction rather than an exclusion.

You cannot claim both the FEIE and the Foreign Tax Credit (FTC) on the same income. However, if you have income above the FEIE limit, you can use the FTC for the non-excluded portion. Some expats find it more beneficial to skip the FEIE entirely and use only the FTC, especially in high-tax countries. Once you revoke the FEIE election, you cannot re-elect it for 5 tax years without IRS approval.

If you don't meet the qualifying test for the full year, your exclusion is prorated. The formula is: annual limit × (qualifying days / days in the year). For example, if you qualify for 200 days in 2025, your exclusion limit is $130,000 × (200/365) = $71,233. Your actual exclusion is the lesser of this prorated limit or your foreign earned income during the qualifying period.