Calculate your US expat tax savings instantly with our Expatriate Foreign Earned Income Exclusion (FEIE) Calculator. Find out how much of your overseas income is tax-free and optimize your expat tax return today.
FEIE Calculator (2024)
What qualifies as foreign earned income under the FEIE?
Foreign earned income refers to pay received for personal services performed in a foreign country. The source of the income is determined by where the services are performed, not where or how you are paid.
- Qualifying Income: Wages, salaries, commissions, bonuses, professional fees, and self-employment income.
- Non-Qualifying Income: Pensions, annuities, Social Security benefits, alimony, dividends, interest, capital gains, and US government pay (including military and civilian employees).
What is the maximum income exclusion amount for the current tax year?
The maximum Foreign Earned Income Exclusion (FEIE) amount adjusts annually for inflation. For current and recent tax years, the maximum exclusion amounts per qualifying individual are:
| Tax Year | Maximum Exclusion Amount |
|---|---|
| 2023 | $120,000 |
| 2024 | $126,500 |
If you are married, both spouses work abroad, and both meet the eligibility requirements individually, each spouse can claim the maximum exclusion. This means a qualifying married couple could exclude up to $253,000 in 2024.
How does the Physical Presence Test determine my eligibility?
To pass the Physical Presence Test for the FEIE, you must be physically present in a foreign country or countries for at least 330 full days during any consecutive 12-month period.
- Full Day: A full day means a period of 24 consecutive hours, starting at midnight.
- Travel Time: Time spent traveling over international waters or over the US does not count toward the 330 days.
- Consecutive Months: The 12-month period can begin on any day of the month, allowing flexibility to shift the period to maximize your tax exclusion.
This test is strictly based on your physical location and does not depend on the nature of your residency, visa status, or your intentions to stay abroad.
What are the specific requirements for the Bona Fide Residence Test?
The Bona Fide Residence Test requires you to establish true residency in a foreign country for an uninterrupted period that includes an entire tax year (January 1 through December 31). The IRS determines this based on your intentions and daily actions.
- Visas and Housing: You must have a long-term visa (not just a tourist visa) and established local housing.
- Integration: Factors like paying local taxes, opening local bank accounts, and moving your family abroad strengthen your claim.
- Statement to Authorities: You cannot claim to be a nonresident to the foreign country's authorities to avoid local taxes; doing so automatically disqualifies you from this test.
Brief trips back to the US are allowed, provided you maintain your foreign residency.
Does the FEIE apply to passive income like capital gains or dividends?
No, the Foreign Earned Income Exclusion does not apply to passive income. The FEIE is strictly limited to earned income, which is compensation received for personal services performed (such as wages, salaries, and self-employment income).
The following types of passive or unearned income cannot be excluded using the FEIE:
- Capital gains (from the sale of stocks, real estate, crypto, etc.)
- Dividends and interest
- Rental income (unless personal services are a material income-producing factor)
- Pensions, annuities, and Social Security benefits
You must still report passive income on your US tax return. However, you may be able to use the Foreign Tax Credit to offset US taxes if that passive income was already taxed by a foreign government.
Do I still need to file a US tax return if my income is fully excluded?
Yes, you absolutely still need to file a US tax return. The United States taxes its citizens and resident aliens on their worldwide income, regardless of where they live.
- Not Automatic: The FEIE is not an automatic exemption. You must actively claim it by filing your tax return (Form 1040) and attaching Form 2555.
- Filing Thresholds: If your gross worldwide income meets the minimum IRS filing thresholds for your age and filing status, you are legally required to file.
- Statute of Limitations: Failing to file means the statute of limitations never starts, leaving you permanently open to IRS audits and potential loss of the ability to claim the exclusion later.
What exactly constitutes a tax home in a foreign country?
To qualify for the FEIE, your "tax home" must be in a foreign country. Your tax home is generally your regular or principal place of business, employment, or post of duty, regardless of where you maintain your family home.
Key considerations include:
- Main Place of Work: If you work primarily in London, London is your tax home, even if you keep a house in New York.
- No US Abode: You cannot have an "abode" in the United States. If your familial, economic, and personal ties remain stronger in the US (e.g., your immediate family lives there, you maintain a primary US home), the IRS may determine your abode is still in the US, disqualifying you.
Can I claim the Foreign Tax Credit on income excluded by the FEIE?
No, you cannot "double dip" by claiming both the Foreign Tax Credit (FTC) and the Foreign Earned Income Exclusion (FEIE) on the exact same income.
However, you can use both strategies together on different portions of your income:
- Excluded Income: If you exclude $126,500 of your salary using the FEIE, you cannot claim the FTC for any foreign taxes paid on that specific $126,500.
- Income Above the Limit: If your earned income exceeds the FEIE limit (e.g., you earn $150,000), you can claim the FTC on the foreign taxes paid on the remaining unexcluded $23,500.
- Passive Income: You can claim the FTC for foreign taxes paid on passive income (like dividends or capital gains), since passive income is ineligible for the FEIE.
How does the Foreign Housing Exclusion work alongside the FEIE?
The Foreign Housing Exclusion allows qualifying expats to exclude additional income from US taxation to cover reasonable housing expenses that exceed a certain base amount. This is claimed alongside the FEIE using the same Form 2555.
- Eligible Expenses: Includes rent, utilities (excluding telephone), real estate taxes, property insurance, and residential repairs. It does not include buying property, furniture, or domestic labor.
- Base Amount: You can only exclude expenses that exceed a baseline (16% of the maximum FEIE amount for the year).
- Location Limits: The IRS caps the maximum housing exclusion based on the specific foreign city you live in, recognizing that cities like Tokyo or London are significantly more expensive than others.
Self-employed individuals use the Foreign Housing Deduction instead of the exclusion.
What are the rules and consequences if I revoke my FEIE election later?
Once you choose to claim the FEIE, that election remains in effect for all future tax years unless you explicitly revoke it. Sometimes, expats revoke the FEIE to switch to the Foreign Tax Credit (FTC) if they move to a high-tax country.
Consequences of Revocation:
- 5-Year Lockout: If you formally revoke your FEIE election, you generally cannot claim the FEIE again for five tax years.
- Private Letter Ruling: To claim it before the five years have passed, you must request special permission from the IRS by obtaining a Private Letter Ruling, which is an expensive and complex legal process.
Because of this strict 5-year penalty, taxpayers should carefully compare the long-term benefits of the FEIE versus the FTC before revoking.
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