Maximize Your Tax Benefits with the Foreign Earned Income Exclusion (FEIE)


Foreign Earned Income Exclusion (FEIE) Overview
What is FEIE? The Foreign Earned Income Exclusion (FEIE) is a U.S. tax provision that allows qualifying taxpayers to exclude a certain amount of their foreign earned income from U.S. taxable income. For the tax year 2022, the maximum exclusion amount is $112,000 per individual. This amount is subject to annual adjustments for inflation.
Eligibility Criteria To qualify for the FEIE, an individual must:
  • Have foreign earned income,
  • Have a tax home in a foreign country, and
  • Meet either the Bona Fide Residence Test or the Physical Presence Test.
Where It Applies The FEIE applies to U.S. citizens and resident aliens who are living and working outside of the United States and meet the eligibility criteria. It is applicable to income earned for services performed outside the U.S., such as wages, salaries, professional fees, and other compensation.
Where It Does Not Apply The FEIE does not apply to:
  • Income earned while working in the United States,
  • Passive income such as dividends, interest, and capital gains,
  • Pension or social security income,
  • Income excluded under the Housing Exclusion or Deduction, and
  • Amounts paid by the U.S. government or its agencies to its employees.
Claiming the Exclusion To claim the FEIE, eligible individuals must file a U.S. income tax return and complete Form 2555 or Form 2555-EZ (if applicable). The exclusion is elective, and taxpayers must actively choose to claim it each year.
Impact on Other Tax Benefits Claiming the FEIE may affect the ability to claim other tax benefits, such as the Earned Income Credit or the Foreign Tax Credit. It is important to consider the interplay between various tax provisions and the potential impact on one's overall tax liability.
Professional Advice Due to the complexity of tax laws and the potential for significant tax implications, it is advisable for individuals to consult with a tax professional who is knowledgeable in international taxation to ensure compliance and optimize tax benefits.

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