tax · 2026-05-01
Compute the federal tax savings from the Foreign Earned Income Exclusion (FEIE) for US citizens working abroad — earned income up to $126,500 (2024).
| Foreign earned income (wages) | $95,000 |
| Foreign housing cost | $24,000 |
| Your US marginal rate % | 24% |
| Residency test | Physical Presence (330+ days abroad) |
| FEIE income excluded | $95,000 |
| Housing exclusion | $3,760 |
| Income still US-taxable | $0 |
US citizens are taxed on worldwide income — but if you live and work abroad, the Foreign Earned Income Exclusion (Form 2555) lets you exclude up to $126,500 (2024) of earned income from US federal tax.
Most short-term expats use Physical Presence. Long-term residents use Bona Fide.
Instead of FEIE, you can claim the Foreign Tax Credit (FTC) for taxes paid abroad. Use FEIE in low-tax countries (UAE, Bahamas, Cayman). Use FTC in high-tax countries (Germany, France, UK, Sweden) where you'd already pay foreign tax above what US would charge.
Yes — but the days IN the US count against you. 330 days OUTSIDE the US in any 12-month period. Most digital nomads find this manageable — visit the US 30 days/yr, fine. Time spent in the air over US airspace doesn't count against; transit days at US airports do.
On the same income: no. You pick one or the other. On DIFFERENT pieces of income: yes — FEIE on wages, FTC on dividends from a foreign account. The strategy is to FEIE the most-taxed income (earned wages at marginal rate) and FTC the rest.
It's not a flat deduction — it's the amount your foreign housing exceeds 16% of FEIE max ($20,240 in 2024), capped at 30% of FEIE max for most locations. High-cost-of-living adjustments push the cap higher (London, Hong Kong, Singapore: $50k+ housing cap). Check the IRS list yearly.