Foreign Earned Income Exclusion (FEIE)

Definition

A U.S. tax provision that allows qualifying American citizens and residents living abroad to exclude a set amount of foreign earned income from U.S. federal taxable income — up to $126,500 in 2024. To qualify, the taxpayer must meet either the bona fide residence test or the physical presence test and have a tax home in a foreign country. The exclusion is claimed on Form 2555 and requires careful analysis to determine whether it is more advantageous than the foreign tax credit.