U.S. Citizens Abroad: Filing and the FEIE

Q: How do I claim it?

You attach Form 2555, Foreign Earned Income, to your Form 1040. Once you choose the exclusion, the choice stays in effect for later years unless you revoke it. You also cannot claim the additional child tax credit or the earned income credit for a year in which you claim the exclusion, and you cannot take a foreign tax credit on income you excluded (Publication 54; Form 2555 instructions). Some people compare the exclusion with the foreign tax credit on Form 1116 and choose the one that saves more.

Q: What does a worked example look like?

Illustration only, with made-up round numbers: Jordan is a U.S. citizen who works in Spain for a full calendar year. Jordan spends 340 days physically in Spain, earns $120,000 in wages from a Spanish employer, has no other income, and has a tax home in Spain.

In most cases, yes, you still file. U.S. citizens are taxed on worldwide income, so living in another country does not end your federal filing duty. You may be able to exclude part of your foreign wages with the foreign earned income exclusion (FEIE). For tax year 2026, the exclusion is limited to $132,900 per person, under Revenue Procedure 2025-32. You claim it on Form 2555, and it comes with trade-offs.

Do I have to file if I live abroad?

Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad, says the filing rules are generally the same whether you live in the United States or abroad. Your income, filing status, and age decide whether you must file. Gross income for this purpose includes amounts you could exclude as foreign earned income. So if your foreign wages are fully excluded, you may still need to file a return, and you should check the filing thresholds in Publication 54 and the Form 1040 instructions.

What does the foreign earned income exclusion cover?

The FEIE covers wages, salaries, and other pay for personal services you perform in a foreign country. It does not cover investment income such as interest or dividends. You must also have a tax home in a foreign country and meet one of two tests:

Physical presence test: you are in one or more foreign countries for 330 full days during any period of 12 consecutive months. The days do not need to be in a row.
Bona fide residence test: you are a bona fide resident of a foreign country for an uninterrupted period that includes an entire tax year.

Being abroad for one year does not automatically make you a bona fide resident. The IRS looks at your intent and your actions, and your actions carry more weight.

How do I claim it?

You attach Form 2555, Foreign Earned Income, to your Form 1040. Once you choose the exclusion, the choice stays in effect for later years unless you revoke it. You also cannot claim the additional child tax credit or the earned income credit for a year in which you claim the exclusion, and you cannot take a foreign tax credit on income you excluded (Publication 54; Form 2555 instructions). Some people compare the exclusion with the foreign tax credit on Form 1116 and choose the one that saves more.

What does a worked example look like?

Illustration only, with made-up round numbers: Jordan is a U.S. citizen who works in Spain for a full calendar year. Jordan spends 340 days physically in Spain, earns $120,000 in wages from a Spanish employer, has no other income, and has a tax home in Spain.

Step 1: Jordan passes the physical presence test, because 340 days is more than 330 full days within a 12-month period.

Step 2: The excludable amount is the smaller of wages earned ($120,000) and the 2026 limit ($132,900). That is $120,000.

Step 3: Jordan still files Form 1040 and attaches Form 2555. The $120,000 is excluded, so it does not raise the tax. This example ignores the foreign housing amount and any tax paid abroad, which can change the result.

What is the most common mistake?

Assuming that living abroad means you don't need to file. Skipping the return can leave you owing tax, penalties, and interest, and the exclusion can only be claimed by attaching Form 2555 to a return. A close second is counting days wrong. A full day is a 24-hour period that starts at midnight, and time over international waters does not count as time in a foreign country (Form 2555 instructions; Publication 54).

What should you do next?

Start a day log now, before you need it. Keep passports, entry and exit stamps, lease papers, and foreign pay stubs. Separately, Publication 54 explains that foreign bank accounts and certain foreign assets may need their own reports, such as FinCEN Form 114 and Form 8938. Those are different filings with their own rules.

If you need more time, the regular due date for 2026 returns is April 15, 2027. Publication 54 describes an automatic 2-month extension for citizens living abroad, to June 15, 2027, and a 6-month extension to October 15, 2027, when you file Form 4868. An extension to file is not an extension to pay.

Here is one original tool, a simple day log with four columns: date, country, where you slept, and whether the day counts as a full day in that country. Ten minutes a month keeps the 330-day test from becoming a guessing game.

If you want to learn more, see how it works.

Sources: Revenue Procedure 2025-32, section 4.39 (2026 foreign earned income exclusion amount of $132,900); IRS Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad (rev. December 2025), chapters 1 and 4 (filing requirements, extensions, FEIE tests, Form 2555, effect of the election); Instructions for Form 2555, Foreign Earned Income (2025 edition), Who Qualifies, Tax home test, Bona fide residence test, Physical presence test, and Line 9-10 instructions; Form 2555 (2025); Form 4868 instructions; IRS due date for 2026 returns (irs.gov/payments/pay-taxes-on-time). This is general information, not advice about your specific return.

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