If you are living and working abroad, you may be eligible to exclude up to $130,000 of your foreign earned income from your 2025 U.S. tax return. You may also qualify to exclude certain foreign housing costs.
Who Qualifies?
To claim the exclusion, you must meet all of the following:
- Have foreign earned income (wages, salaries, self-employment income from work performed abroad)
- Have a tax home in a foreign country
- Meet either:
- The Bona Fide Residence Test, or
- The Physical Presence Test
Key Tests Explained
Tax Home Test
Your tax home is your regular place of business or employment. It must be located in a foreign country for the period you claim the exclusion.
Special Exception: U.S. citizens serving in a combat zone designated by Executive Order may still qualify even if they maintain an abode in the U.S.
Bona Fide Residence Test
You must be:
- A U.S. citizen who is a bona fide resident of a foreign country for an entire tax year (Jan 1–Dec 31), or
- A resident alien from a treaty country who meets the same condition
Physical Presence Test
You must be physically present in a foreign country for at least 330 full days during any 12-month period.
A full day means a 24-hour period starting at midnight. Travel days over international waters do not count.
Foreign Housing Exclusion
You may also exclude qualified housing expenses such as rent, utilities, and furniture rental.
- Base housing amount: $20,800 (16% of the FEIE)
- General housing limit: $39,000 (30% of the FEIE)
- Higher limits may apply in high-cost cities like Tokyo, London, or Hong Kong.
Important Notes
- Form 2555-EZ has been discontinued. All taxpayers must use the full Form 2555.
- Income earned as a U.S. government employee abroad does not qualify for the exclusion.