Let’s be honest—nobody gets excited about taxes. Especially when you're soaking up sunshine in Spain or working remotely in the cafes of Chiang Mai. But if you're a digital nomad or one of the many American expats living your best life abroad, there's a silver lining you can’t afford to ignore: the Foreign Earned Income Exclusion. It's not just a fancy tax term—it could be your golden ticket to massive savings. Ready to figure out how you can keep more of your hard-earned money?
In a nutshell, the Foreign Earned Income Exclusion allows qualifying U.S. citizens and resident aliens to exclude a portion of their foreign income—up to $120,000 in 2025—from U.S. federal income taxes. That's not pocket change! It's a legal and powerful way to reduce what you owe to Uncle Sam, all while living your global dream.
Good question. The United States is one of the few countries that taxes its citizens no matter where they live. Yep—even if you haven’t set foot on U.S. soil in years, the IRS still wants a piece of the pie. That’s where the FEIE comes in to give you some serious relief.
So, who gets to enjoy this juicy tax benefit? If you're earning income while living abroad, there's a good chance you’re eligible. Specifically, the FEIE is ideal for:
Before you get too excited, there's a catch—you have to qualify. That means passing one of two tests: the Physical Presence Test for FEIE or the Bona Fide Residency Test for FEIE. Let’s dive into both and see which fits your lifestyle.
Are you constantly hopping between time zones but spending the majority of your time outside the U.S.? Then this test is likely your jam. You need to be physically present in a foreign country (or countries) for at least 330 full days during any 12-month period. It's strict—partial days don't count, so tracking is key. Miss the 330-day mark by even a few hours? You’re out.
If you’ve planted roots abroad—think long-term rental, local bank account, maybe even a dog—this test might be more your speed. The Bona Fide Residency Test requires you to be a bona fide resident of a foreign country for an uninterrupted full tax year. It’s a bit more subjective and may require additional proof of your “foreign life,” but it can be more flexible for expats with stability overseas.