US taxes while living abroad
Who qualifies for the foreign earned income exclusion?
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You may qualify if you have foreign earned income, a tax home in a foreign country, and you meet either the bona fide residence test or the physical presence test of 330 full days abroad in 12 consecutive months. You claim it by election on Form 2555 with a filed return. The IRS lists a maximum of $130,000 for 2025 and $132,900 for 2026 per qualifying person. A licensed tax professional should apply these rules to your own facts.
Key facts
| Fact | What the source says | Source |
|---|---|---|
| Core conditions | Foreign tax home, foreign earned income, and one of two tests | Official source |
| Physical presence test | 330 full days in foreign countries in any 12 consecutive months | Official source |
| Full day | A full 24 hours from midnight to midnight | Official source |
| Maximum, 2025 | $130,000 per qualifying person, or foreign earned income if less | Official source |
| Maximum, 2026 | $132,900 per qualifying person | Official source |
| How it is claimed | An election on Form 2555, filed with the return | Official source |
Is the exclusion a tax exemption for everything earned abroad?
No. It applies to foreign earned income, which means pay for work you perform. Pensions, interest, dividends and capital gains are not earned income for this purpose. You also need a tax home in a foreign country and must meet one of the two tests. The exclusion is an election, so it must be claimed on a filed return.
The exclusion does not reduce self-employment tax. A self-employed person can owe US self-employment tax even when all income tax is excluded.
What is the difference between bona fide residence and physical presence?
The bona fide residence test looks at whether you are a resident of a foreign country for an uninterrupted period that includes an entire tax year. Living abroad for a year does not by itself make you a bona fide resident, and whether you can use this test depends on your status. The physical presence test is a day count. You need 330 full days in foreign countries during a period of 12 consecutive months.
How do you count 330 days correctly?
The IRS physical presence page defines a full day as 24 consecutive hours from midnight to midnight. Time over international waters or airspace does not count as a day in a foreign country. The page gives examples of travel between foreign countries that takes less than or more than 24 hours.
The 12-month period can begin on any day, and qualifying periods can overlap. Your first travel date is not always the best start date. Keep a travel ledger with each departure and arrival time, and note why each day counted or did not.
- Record every flight with departure and arrival times and places.
- Mark partial days and days in transit separately.
- Test more than one possible 12-month window.
- Keep boarding passes, passport stamps or employer travel records.
Why do some IRS pages show older exclusion amounts?
The general IRS exclusion page lists example caps only through 2023. The IRS page on figuring the exclusion lists $130,000 for 2025 and $132,900 for 2026. The amount changes every year, so use the figure published for the year you file, together with that year's Form 2555 instructions. A housing exclusion or deduction has its own limits.
Checklist before you start
- Build a day-by-day travel ledger for the full period you may test.
- Write down where your main place of work was during the year.
- Separate earned income from pensions and investment income.
- Collect employer statements showing foreign work and housing amounts.
- Find any earlier Form 2555 you filed and note any revoked election.
- Bring proof of foreign residence, such as a residence permit or lease.
Common questions
What is the foreign earned income exclusion for 2026?
The IRS page on figuring the exclusion lists a maximum of $132,900 per qualifying person for 2026. For 2025 it lists $130,000.
Does a day of travel count toward the 330 days?
Only full days in a foreign country count. Time over international waters or airspace does not, and the IRS gives specific travel examples.
Can both spouses claim the exclusion?
Each spouse who separately qualifies can claim it on their own foreign earned income. One spouse cannot use the other's unused amount.
Does the exclusion remove self-employment tax?
No. Publication 54 states that the exclusion does not reduce self-employment earnings for self-employment tax.
Official sources
- Publication 54, Tax Guide for US Citizens and Resident Aliens Abroad. IRS.
- Foreign earned income exclusion: physical presence test. IRS.
- Figuring the foreign earned income exclusion. IRS.
- Foreign earned income exclusion. IRS.
Sources checked . Official pages change. Use the source over this summary if they differ.
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General information from IRS and FinCEN publications, not tax advice. Rules depend on your facts and the tax year. Confirm with a licensed tax professional before you file. US Expat Desk is a private company. We are not affiliated with the US government, the State Department, or the FBI.