The 2025/2026 numbers
$130,000 for 2025, and $132,900 for 2026, per qualifying person.
The short answer
Two tests, one home
You need a foreign tax home, plus either 330 full days across one or more foreign countries or bona fide residence for a full tax year.
Earned income only
Earned income only, and it does not reduce self employment tax.
A 5-year lockout
Claiming it is an election. Revoke it and you are generally locked out for five years.
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The setup
A statutory election — not a deduction
The foreign earned income exclusion, or FEIE (IRC section 911), lets you remove a set amount of foreign earned income from your taxable income, if you qualify. It does not remove it from the rate calculation, so any remaining income is taxed at the rate that would have applied without the exclusion. For 2025 that amount is $130,000. For 2026 it rises to $132,900. The figure is indexed and moves every year.
01The numbers
FEIE and housing figures — 2025 vs 2026
Per qualifying person, indexed annually. It is not per household — spouses each get their own claim.
| 2025 | 2026 | |
|---|---|---|
| FEIE limit (per person) | $130,000 | $132,900 |
| Housing base amount | $20,800 | $21,264 |
| Housing general limit | $39,000 | $39,870 |
It is per person, not per household. If you and your spouse both work abroad and both meet a qualifying test, you can each claim it, which is up to $260,000 excluded for 2025.
02Who qualifies
Who qualifies for the foreign earned income exclusion
Three conditions, and you need all three.
Foreign earned income.Wages, salary, or self employment income for work you actually performed abroad. Where the employer is based does not matter. Where you were sitting does.
A tax home in a foreign country.Your regular place of work has to be outside the US, and you cannot keep an abode in the US at the same time. This is the condition people overlook.
One of the two tests.Either the physical presence test, 330 full days across one or more foreign countries during any twelve consecutive months, or the bona fide residence test, residence in a foreign country for an uninterrupted period covering a whole tax year.
The two tests are not interchangeable. Physical presence is arithmetic, you count days and a part day does not count. Bona fide residence is a facts and circumstances judgment about whether you genuinely settled there, and it is generally not available to green card holders unless they are a national of a treaty country.
| Physical presence | Bona fide residence | |
|---|---|---|
| What it is | A day count | A facts-and-circumstances judgment that you settled there |
| How it is measured | 330 full days abroad in any 12 months, where a part-day does not count | Residence for an uninterrupted period covering a full tax year |
| Green card holders | Available | Generally not, unless a national of a treaty country |
03What FEIE does not cover
What FEIE does not cover
Unearned income.Dividends, interest, rent, pensions, and capital gains fall outside it completely.
Self employment tax.You can exclude your foreign freelance income from income tax and still owe self employment tax on the same earnings. A totalization agreement can remove the US charge, but only where one exists and its rules assign you to the foreign system, so check before assuming.
US source income.Work performed inside the US, even on a short trip back, does not qualify.
Foreign tax you paid.The foreign earned income exclusion removes income from your taxable income. It gives no credit for tax paid abroad, and none at all for foreign tax on income you excluded, or could have excluded.
04Part-year proration
If you qualify for FEIE only part of the year
The FEIE limit is prorated by qualifying days.
Move abroad in May 2025 and qualify for 245 days of that year, and your ceiling is $130,000 multiplied by 245 over 365, which is about $87,000, not the full $130,000.
Your exclusion is generally the lesser of that prorated ceiling and what you earned abroad in the qualifying period. If you are self employed, expenses allocable to the excluded income reduce it further. This is where first year expats most often get the number wrong.
Proration, worked through
Arrive in May 2025, qualify for 245 days
$130,000 × (245 qualifying days ÷ 365) ≈ $87,000 ceiling
Full-year limit$130,000
Your prorated ceiling~$87,000
Your exclusion is the lesser of this prorated ceiling and what you actually earned abroad in the qualifying period.
05Housing
The foreign housing exclusion, or deduction if you are self employed
$20,800
2025 base amount
$21,264
2026 base amount
$39,000
2025 general limit
$39,870
2026 general limit
Qualifying housing costs above a base amount get separate treatment, subject to a cap. Employees exclude them. Self employed filers deduct them instead. For a full qualifying year the 2025 base is $20,800 and the general limit is $39,000. For 2026 they are $21,264 and $39,870. Both figures prorate by qualifying days in the same way the earned income ceiling does. The limit is also higher in expensive cities, and the IRS publishes the list.
Order matters, and it differs by status. Employees figure the housing exclusion first, and the foreign earned income exclusion is then limited to what remains. Self employed filers take the housing deduction separately, after the earned income exclusion.
06How to claim
How to claim FEIE
File Form 2555 with your Form 1040. There is no automatic version of this. If the form is not attached, the exclusion is not claimed, and excluded income still has to be reported on the return before it comes back out.
If you are in your first year abroad and will not meet a test by the filing deadline, Form 2350 asks for extra time to qualify. It extends filing, not payment.
Two forms to know
Form 2555 claims the exclusion. Form 2350 asks for extra time to qualify in your first year abroad — it extends filing, not payment.
07The trap
The trap worth knowing before you claim it
Once you claim the foreign earned income exclusion, revoking it generally locks you out for five years unless the IRS consents to an earlier return. It is an election, not a yearly checkbox.
The exclusion is not always the better choice. If the country you live in taxes you more heavily than the US, the foreign tax credit usually leaves you better off, because it also covers investment income, and any unused credit carries forward to later years. In a low-tax or no-tax country, the exclusion usually leaves you better off. Compare the two in your first year abroad, while the election is still open.
Five-year lockout
Revoke the election and you are generally locked out for five years unless the IRS consents to an earlier return.
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Check whether you qualify
Check whether you qualify
Tell us your dates abroad and where you worked, and we will tell you which test you meet and whether the exclusion or the credit leaves you better off.
Reviewed by George Dimov, CPA, New York, NY. Serving clients in all 50 states, 15+ years advising individuals on expatriate and cross border tax. President of George Dimov, CPA, a New York City firm serving clients across the five boroughs and nationwide.