Foreign earned income exclusion (FEIE)
A US tax exclusion for foreign-earned income of US citizens living abroad, up to about $130K per year (2026 estimate).
Definition
Foreign earned income exclusion (FEIE) under IRC § 911 lets US citizens and resident aliens living abroad exclude up to about $130,000 of foreign earned income from US tax (2026 estimated). Requires bona fide residence or 330-day physical presence test.
Context
FEIE applies to earned income (wages, salaries, self-employment), not passive income (royalties, dividends, capital gains).
Example
A US-citizen LLC owner living in Portugal earns $150K in service income through their Delaware LLC. FEIE excludes about $130K; remaining $20K subject to US tax.
Common pitfalls
- FEIE applies to earned income only.
- Physical presence test requires careful day-counting.
- State tax may still apply if state ties not severed.