What is the Foreign Earned Income Exclusion (FEIE)?

The United States taxes its citizens and residents on worldwide income wherever they live. The FEIE is the main relief for people who genuinely live and work abroad: it excludes foreign earned income up to a cap the IRS adjusts for inflation each year, with a related exclusion or deduction for some housing costs.

The two conditions

Qualifying takes both of these, not one:

1. Your tax home — your main place of business or employment — must be in a foreign country.
2. You must pass one of two tests: the physical presence test or the bona fide residence test.

The exclusion is then claimed on Form 2555 with your return. It applies to earned income — wages and self-employment earnings from work you actually performed abroad — not to dividends, interest, rental income or pensions, and it does not remove self-employment tax.

The physical presence test: pure day counting

You pass by being physically present in a foreign country or countries for at least 330 full days during any period of 12 consecutive months. Only full midnight-to-midnight days count, days touching the US do not, and — crucially — the 12-month window is yours to choose, so picking the right start date is often the difference between qualifying and not.

Run your own dates through the free FEIE physical presence test calculator — it counts the full days and searches for the window that qualifies.

The bona fide residence test: facts, not days

The alternative is being a bona fide resident of a foreign country for an uninterrupted period that includes a full tax year. It rests on facts — your home, your intentions, your ties — rather than a day count. The bona fide residence test explains who it fits and how it differs.

As a rule of thumb: settled expats with a real base abroad tend to use bona fide residence; nomads and first-year movers count days under the physical presence test.

Why the day record decides it

For the physical presence route, a single miscounted trip can cost the whole exclusion — the margin in a 365-day window is roughly 35 non-foreign days, and travel days burn it fast. Keep the record as you go rather than reconstructing it at filing time, and check the current IRS FEIE guidance for the year's cap and conditions.

How Flags Tax helps

Flags Tax rebuilds your country days from photo metadata and manual confirmation, so the day record a physical-presence claim depends on stays complete while you travel. You confirm every stay.

Flags is an early-warning tool, not tax advice. It does not compute the FEIE or decide a claim — confirm your position with a qualified adviser.