What is a Foreign earned income exclusion?
The foreign earned income exclusion (FEIE) allows US citizens and resident aliens working abroad to exclude up to $130,000 of foreign wages or self-employment income from US federal income tax for 2025. Taxpayers must maintain a foreign tax home and satisfy either the physical presence test (330 full days abroad) or the bona fide residence test. Claimed on Form 2555 attached to Form 1040, the exclusion remains in effect for future years unless formally revoked. A separate housing exclusion may also apply. Expats can coordinate with a Health savings account to reduce US tax on non-excluded income.
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