f you're a U.S. citizen or resident alien living and working outside the United States, you may qualify for the Foreign Earned Income Exclusion (FEIE). This tax benefit allows eligible taxpayers to exclude up to $132,900 of foreign earned income for tax year 2026 (returns filed in 2027). You may also qualify for a Foreign Housing Exclusion or Foreign Housing Deduction for certain housing expenses paid while living abroad.
To claim these benefits, you'll need to complete Form 2555, Foreign Earned Income.
What Is Foreign Earned Income?
Foreign earned income is income you receive for services performed in a foreign country, including:
- Wages and salaries
- Commissions
- Bonuses
- Professional fees
- Self-employment income
Foreign earned income does not include:
- Interest
- Dividends
- Capital gains
- Pension income
- Social Security benefits
- Other passive investment income
Example: If you are a U.S. green card holder living and working in Ecuador and earn wages from an employer there, those wages are considered foreign earned income.
Who Qualifies for the Foreign Earned Income Exclusion?
To claim the FEIE on Form 2555, you must meet all of the following requirements:
- Have foreign earned income.
- Have a tax home in a foreign country.
- Be a U.S. citizen or resident alien.
- Meet either:
- The Bona Fide Residence Test, or
- The Physical Presence Test.
Understanding the Qualification Tests
Tax Home Test
Your tax home is generally your regular place of business or employment.
To qualify for the FEIE, your tax home must be located in a foreign country during the period you claim the exclusion.
Bona Fide Residence Test
You may qualify if:
- You are a U.S. citizen who was a bona fide resident of a foreign country for an uninterrupted period that includes an entire tax year, or
- You are a resident alien from a country with an income tax treaty with the United States and were a bona fide resident of a foreign country for an uninterrupted period that includes an entire tax year.
Temporary trips back to the United States generally do not affect your qualification if you intend to return to your foreign residence.
Physical Presence Test
You may qualify if you are physically present in one or more foreign countries for at least 330 full days during any consecutive 12-month period.
Keep in mind:
- The 330 days do not have to be consecutive.
- A full day is a complete 24-hour period beginning at midnight.
- Days spent traveling over international waters generally do not count.
What Do I Enter for "Number of Days in Your Qualifying Period That Fall Within the Tax Year"?
Enter the number of days during the tax year that you:
- Maintained a foreign tax home, and
- Met either the Bona Fide Residence Test or Physical Presence Test.
This entry is important because taxpayers who qualify for only part of the year may have a reduced maximum exclusion amount.
Reporting Foreign Income
Even if you qualify for the exclusion, you must first report all foreign earned income on your U.S. tax return.
If your foreign income was not reported on a U.S. tax form such as a W-2, enter it in TaxSlayer:
Federal → Income → Less Common Income → Other Compensation → Foreign Earned Compensation
How to Claim the Foreign Earned Income Exclusion
After entering your foreign income, complete Form 2555 in TaxSlayer:
Federal → Income → Less Common Income → Foreign Earned Income Exclusion (Form 2555)
You'll be asked to provide:
- Country where the income was earned
- Dates of foreign residence or physical presence
- Amount of foreign earned income
- Foreign housing information, if applicable
Foreign Housing Exclusion and Deduction
In addition to the FEIE, you may qualify for a housing benefit based on eligible housing expenses paid while living abroad.
Qualified expenses may include:
- Rent
- Utilities (excluding telephone charges)
- Residential parking
- Furniture rental
- Certain household expenses
2026 Housing Limits
- Base housing amount: $21,264
- General housing expense limit: $39,870
- Higher limits may apply in certain high-cost locations.
What If I Don't Qualify by the Filing Deadline?
If you have not yet met the Bona Fide Residence Test or Physical Presence Test by the filing deadline, you may have options.
File Now and Amend Later
You can:
- File your return on time.
- Report the foreign income as taxable.
- Amend your return later using Form 1040-X after you qualify for Form 2555.
Automatic 2-Month Extension
Taxpayers living outside the United States on the regular due date may qualify for an automatic extension to June 15.
You must:
- Attach a statement explaining that you were living abroad on the original due date.
- Pay any tax due by the regular deadline to minimize interest charges.
File Form 2350
If you expect to qualify after the filing deadline, you may be able to request additional time by filing Form 2350 directly with the IRS.
Note: Form 2350 is not supported within the program.
Waiver of Time Requirements
The IRS may waive the time requirements for taxpayers forced to leave a foreign country because of:
- War
- Civil unrest
- Other adverse conditions identified by the IRS
To qualify for a waiver, you must generally show that you intended to meet the qualification requirements before the adverse conditions occurred.
Related Articles
Can I claim both the Foreign Tax Credit (Form 1116) and Foreign Earned Income Exclusion (Form 2555)?