U.S. citizens and residents abroad can exclude up to $132,000 of foreign earned income in 2026 — plus a housing exclusion. See how much of your overseas pay escapes U.S. tax under the FEIE.
| Scenario | Income | Housing | FEIE | Housing Excl. | Total Excluded |
|---|---|---|---|---|---|
| Bona fide, moderate housing | $120,000 | $25,000 | $120,000 | $3,880 | $123,880 |
| Bona fide, high-cost city | $180,000 | $40,000 | $132,000 | $18,480 | $150,480 |
| Bona fide, very high housing | $150,000 | $60,000 | $132,000 | $18,480 (cap) | $150,480 |
| Physical presence, 330 days | $150,000 | $30,000 | $119,342 | $8,028 | $127,371 |
Housing exclusion = housing expenses above 16% of the FEIE ($21,120), capped at 30% of the FEIE minus the base amount ($18,480). Physical-presence filers prorate by days abroad.
The Foreign Earned Income Exclusion lets U.S. citizens and resident aliens who live abroad exclude foreign earned income (wages and self-employment pay, not dividends or rent) from U.S. income tax. For 2026 the maximum exclusion is $132,000. You claim it on Form 2555.
On top of the FEIE, you can exclude employer-provided housing or (if self-employed, a deduction for) housing expenses that exceed 16% of the FEIE ($21,120 in 2026). The exclusion is capped at 30% of the FEIE minus the base amount — a maximum of $18,480. High-cost locations have separate, higher caps published annually by the IRS.
The FEIE only offsets income tax. It does not reduce self-employment tax, and you cannot exclude more than the FEIE even if your income is higher. It also interacts with the Child Tax Credit and the Additional Child Tax Credit — excluded income still counts for some phase-outs.
The FEIE is a powerful exclusion, but it is often misunderstood as "expats don't pay U.S. tax." Three things blunt it. First, the exclusion only covers earned income — investment income, pensions, and rental profit remain fully taxable. Second, it does not touch self-employment tax; a freelancer abroad still owes 15.3% on net SE income. Third, if your foreign income exceeds $132,000, the excess is taxed at your regular U.S. rates, and excluded income still stacks underneath it for bracket purposes.
Many expats in high-tax countries instead use the Foreign Tax Credit (Form 1116), which offsets U.S. tax dollar-for-dollar with foreign tax paid and — unlike the FEIE — can also offset tax on investment income. The two are mutually exclusive for the same income, so the choice matters. A common strategy is to exclude earned income with the FEIE and credit remaining foreign tax on unexcluded income.
The housing exclusion is not "your rent, excluded." It is your housing expenses minus a base amount equal to 16% of the FEIE, capped at 30% of the FEIE minus that base. For 2026 that means only housing above $21,120 counts, and the exclusion tops out at $18,480 unless you live in a high-cost locality with a higher IRS cap. Physical-presence filers prorate both the base and the cap by the fraction of the 12-month window they qualified.
Housing costs that count include rent, utilities (excluding telephone and internet), repairs, and residential parking. They do not include the cost of buying property or paying a mortgage principal. Keep receipts — the IRS expects substantiation with Form 2555.
⚠️ Important: This calculator estimates the FEIE and Foreign Housing Exclusion for the 2026 tax year. It does not compute the Foreign Tax Credit, self-employment tax, or state tax. FEIE and FTC cannot both be claimed on the same income. Filing thresholds, high-cost housing caps, and residency rules are fact-specific. Consult a cross-border tax professional.