What is the Foreign Earned Income Exclusion for 2025?
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For 2025 the maximum Foreign Earned Income Exclusion is $130,000 per qualifying person. If you meet a qualifying test, you can exclude up to that amount of foreign earned income from US federal tax on Form 2555. The limit is indexed for inflation and rises to $132,900 for 2026.
How much foreign income can I exclude from US tax?
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Up to $130,000 for 2025, or the amount of your foreign earned income if it is lower. Earned income above the limit stays US-taxable unless the Foreign Tax Credit or the separate foreign housing exclusion reduces it. A married couple who both qualify can each claim their own exclusion.
What are the FEIE qualifying tests?
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You must have a tax home abroad and meet either the bona fide residence test (a full tax year as a genuine resident of a foreign country) or the physical presence test (330 full days in any 12-month period). The calculator assumes you meet one of these when you select 'Yes'.
What counts as foreign earned income?
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Earned income is pay for services performed abroad — salary, wages, professional fees and self-employment income. It does not include investment income, dividends, interest, capital gains, pensions or US-source pay, none of which can be excluded under the FEIE.
Should I use the FEIE or the Foreign Tax Credit in the UK?
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In the high-tax UK the Foreign Tax Credit often works better: it can eliminate US tax and leave carryforwards, whereas the FEIE simply removes income from the calculation. The FEIE tends to suit lower-taxed or self-employed situations. The right choice depends on your full picture, and switching has consequences.
Can I claim both the FEIE and the Foreign Tax Credit?
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You can use both, but not on the same dollars of income. A common approach is to exclude income up to the FEIE limit and claim the Foreign Tax Credit on the remainder. The interaction is intricate and getting the ordering wrong can waste credits or create tax.
What is the foreign housing exclusion?
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On top of the FEIE, qualifying taxpayers can exclude or deduct certain foreign housing costs above a base amount, subject to a cap that varies by location. It is claimed on the same Form 2555 and can shelter income beyond the $130,000 exclusion for those with high housing costs.
Does the FEIE eliminate self-employment tax?
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No. The FEIE removes income from federal income tax, but self-employment tax (Social Security and Medicare) still applies unless the US-UK Totalization Agreement exempts you. Many self-employed Americans in the UK are surprised by residual self-employment tax despite a full exclusion.
If I exclude my income, do I still have to file?
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Yes. The FEIE is only available by filing a US return with Form 2555 attached — the exclusion is not automatic. If your income is above the filing threshold you must file even if the exclusion reduces your US tax to zero, and failing to do so can forfeit the exclusion.
Can I lose the FEIE if I revoke it?
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Yes. If you revoke the election you generally cannot claim the FEIE again for five tax years without IRS approval. Because the FEIE and Foreign Tax Credit interact, an ill-considered switch can lock you out of the better option for years, so model both before deciding.
Does the FEIE help with the 3.8% Net Investment Income Tax?
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No. The FEIE applies only to earned income, while the 3.8% NIIT falls on investment income, and the Foreign Tax Credit cannot offset the NIIT either. High-net-worth Americans in the UK can still owe US tax on dividends, interest and gains despite fully excluding their salary.
Is the FEIE calculator suitable for high earners and expats?
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It gives an accurate exclusion figure, which every US expat plan needs. But above the limit — and once pensions, PFICs on UK funds, the NIIT and the FEIE-versus-credit decision come into play — the numbers turn on cross-border expertise. Book a consultation to model your full position.
