.png)
Foreign Earned Income Exclusion 2026: Complete Guide
Short answer: For tax year 2026, the foreign earned income exclusion (FEIE) lets you exclude up to $132,900 of foreign earned income; for tax year 2025 it is $130,000. You need a foreign tax home plus one of two tests, and you claim it on Form 2555.
Key takeaways
The FEIE maximum is $132,900 per person for tax year 2026 and $130,000 per person for tax year 2025.
You need a tax home in a foreign country and must pass either the physical presence test or the bona fide residence test.
It covers pay for personal services only. Pensions, annuities and Social Security benefits do not qualify.
The exclusion lowers income tax only, not self-employment tax.
It is never automatic. You claim it on Form 2555, and only on a return you file.
The 2026 and 2025 maximums
The FEIE lets qualifying Americans abroad keep a set amount of foreign earned income out of US income tax. The most you can exclude is the lesser of your foreign earned income or the cap for the year.
Tax year 2026: up to $132,900 per person. This comes from the IRS inflation adjustment in Rev. Proc. 2025-32, and it applies to returns filed in 2027.
Tax year 2025: up to $130,000 per person. This is the amount for the return you file in 2026.
Married couples. The cap is per person, not per household. If both spouses qualify, each can claim their own exclusion. The IRS says a couple can together exclude as much as $260,000 for the 2025 tax year. For tax year 2026, each qualifying spouse's cap is $132,900.
Income above the cap is taxed at the rates that would apply without the exclusion. Excluding income does not always erase a filing duty. For the filing test, gross income includes income you can exclude. For tax year 2025, the gross income threshold is $15,750 for a single filer under 65 and $31,500 for a married couple filing jointly when both are under 65. If you are self-employed, you must file when net earnings from self-employment are $400 or more.
Who qualifies for the FEIE
You need two things: a tax home in a foreign country, and one of two tests.
Tax home. You do not have a foreign tax home if your abode remains in the United States. The one exception is work in a presidentially declared combat zone.
The two tests. The comparison below shows how they differ.
Who can use it — Physical presence test: US citizens and resident aliens; Bona fide residence test: US citizens. A resident alien can use it only if they are a citizen or national of a country with a US income tax treaty
What it requires — Physical presence test: Physically present in one or more foreign countries at least 330 full days during any period of 12 consecutive months; Bona fide residence test: A bona fide resident of one or more foreign countries for an uninterrupted period that includes an entire tax year
Typical situation — Physical presence test: Your days abroad are counted inside a 12-month window that does not have to match the calendar year; Bona fide residence test: You have settled in a foreign country, and that residence covers a full tax year without a break
What income counts and what does not
Qualifying income is foreign earned income: wages, salaries, professional fees or other amounts paid to you for personal services you performed.
These do not qualify:
US government pay
Pay for services performed in international waters or airspace
Payments received after the end of the year following the year you earned them
Employer-provided meals and lodging that are excludable
Pension or annuity payments, including Social Security benefits
If you own a corporation, be careful. Amounts it pays you that are a distribution of earnings and profits, rather than reasonable pay for your work, are not foreign earned income.
Self-employment tax is not reduced
You can claim the FEIE on self-employment income. But it reduces income tax only. It will not reduce your self-employment tax. If you work for yourself abroad, you may still owe that tax.
Partial-year proration
If you qualify for only part of a year, the maximum is prorated by your qualifying days. The IRS gives this worked example: for 2025, a person with 140 qualifying days has a maximum of 140/365 x $130,000, which is $49,863.
The foreign housing exclusion and deduction
You may also be able to exclude or deduct foreign housing costs. The standard limit on housing expenses is 30% of the maximum exclusion. The IRS states it as $39,000 for 2025 and $39,870 for 2026. The limit varies by location and by how many days you qualify. High-cost locations have higher limits, which the IRS lists in an annual notice (Notice 2025-16 for 2025).
Your housing amount is your qualifying housing expenses minus a base housing amount. The base amount is 16% of the maximum exclusion for the year. On the 2025 Form 2555 it is $56.99 per day, or $20,800 for a full 365-day year.
If you are self-employed, you may be able to claim the foreign housing deduction instead of the housing exclusion.
FEIE vs the foreign tax credit
The foreign tax credit (Form 1116) credits foreign income taxes you paid against your US tax. The exclusion removes income from US tax. They interact in a few firm ways:
You cannot take a foreign tax credit or deduction for foreign taxes on income you choose to exclude.
If only part of your wages is excluded, you cannot credit or deduct the foreign tax tied to the excluded part.
The credit cannot exceed the US tax that matches your foreign-source income, and it cannot exceed the foreign tax you actually owed.
Unused foreign taxes carry back 1 year and forward 10 years.
Which one produces the lower US bill depends on your actual numbers, so run both calculations before you file.
How you claim it, and the deadlines abroad
You claim the exclusion on Form 2555, and only if you file a return reporting the income.
For a calendar-year return, the regular due date is April 15. If you live outside the US and Puerto Rico on that date, you get an automatic 2-month extension to June 15. You attach a statement to your return explaining why you qualify. Interest still runs from April 15 on any tax unpaid by then.
Form 4868 gives you a total of 6 months, to October 15, but it is an extension to file and not to pay. People abroad can also ask in writing for an extra 2 months, to December 15, by October 15. For the full comparison, read our guide to expat tax extensions and Form 2350 vs 4868.
Haven't met a test yet? Form 2350
Form 2350 is for people who expect to meet the bona fide residence or physical presence test only after the return is due, and who have a foreign tax home throughout the qualifying period. An approved extension generally runs 30 days beyond the date you can reasonably expect to qualify, and you file it by the return's due date.
How All State Tax Resolution helps
Sabih Shafi is an IRS Enrolled Agent, federally licensed to represent taxpayers before the IRS in all 50 states. We serve Americans abroad in English and Spanish.
For the FEIE, we:
Check your tax home and your physical presence or residence dates
Prepare Form 2555 and your return, including the housing exclusion or deduction where it applies
Run the exclusion and the foreign tax credit both ways, so you see the numbers before choosing
The free review is 20 minutes. If you hire us, the flat fee is quoted in writing before any work starts. You can check any preparer's credentials at the IRS Return Preparer Office directory.
General information, not tax advice for your situation.
Frequently Asked Questions
What is the foreign earned income exclusion for 2026?
For tax year 2026 the maximum is $132,900 per person. For tax year 2025 it is $130,000 per person. In both years it is the lesser of your foreign earned income or the cap, prorated if you qualify for only part of the year.
Does the FEIE cover Social Security, a pension or US government pay?
No. Pension or annuity payments, including Social Security benefits, do not qualify. Neither does US government pay. The FEIE is for pay for personal services you performed abroad.
Do I still have to file if I exclude all my income?
Possibly. For the filing test, gross income includes income you can exclude. And the exclusion is claimed on Form 2555 with a filed return, so you must file to get it.
Can I use the FEIE and the foreign tax credit together?
Not on the same income. You cannot take a foreign tax credit or deduction for foreign taxes on income you choose to exclude. If only part of your wages is excluded, the foreign tax tied to the excluded part cannot be credited or deducted.
Does the FEIE reduce self-employment tax?
No. It reduces income tax only. Self-employed people can still owe self-employment tax on income they exclude.
What if I have not yet met the 330-day or residence requirement?
Form 2350 can extend the filing deadline for people who expect to meet either test only after the return is due. It generally runs 30 days beyond the date you can reasonably expect to qualify.
Last reviewed: October 2026 by Sabih Shafi, EA
Related Reading
Talk to an Enrolled Agent
This article is general information, not individual tax advice. If you want to talk through your own IRS or state balance, book a free 20-minute review or call or text us directly.
Comments