Glossary
Foreign Earned Income Exclusion (FEIE)
A US tax rule that lets qualifying Americans living abroad exclude a large chunk of foreign-earned wages and self-employment income from US federal income tax. You still have to file a return to claim it.
The United States taxes its citizens and green-card holders on worldwide income, no matter where they live. The Foreign Earned Income Exclusion is one of the main tools that softens this. If you qualify, you can exclude a set amount of income you earned by working abroad (a figure the IRS adjusts each year, commonly in the low six figures) from your US federal income tax.
This matters the moment you move abroad as a US person, because leaving the country does not end your US filing obligation. The FEIE can wipe out a big share of your US tax bill on salary or freelance income earned overseas, but only if you actively claim it on Form 2555 with your annual return. It is never automatic.
The catch most people miss is the qualifying test. You generally need either a full tax year of genuine residence in another country (the bona fide residence test) or at least 330 full days physically outside the US in a 12-month window (the physical presence test). Travel days, trips home, and time spent in countries where you have no real ties can quietly break either test. The exclusion also covers earned income only — not investment income, pensions, or dividends — and it can interact awkwardly with the Foreign Tax Credit, so it is not always the best choice in a high-tax country.
Whether the FEIE is right for you depends heavily on your tax residency and on any double taxation treaty between the US and your new home. People moving to low-tax or territorial taxation countries often lean on the FEIE, while those in high-tax countries may do better with credits. Our tax residency checker can help you sketch out where you stand before you decide. This is general information, not advice. Confirm the current rules with the IRS or a cross-border tax professional before filing.
Where you’ll meet this
- Filing your first US tax return after moving abroad, when your accountant asks whether to claim the FEIE or the Foreign Tax Credit.
- Tracking your days in and out of the US on a calendar to make sure you clear the 330-day physical presence test.
- Reading remote-work and digital-nomad forums where US citizens debate FEIE versus credits for their specific country.