2017 Foreign Earned Income Exclusion
The 2017 Foreign Earned Income Exclusion is $102,100.
Effective 2017-01-01Source: Rev. Proc. 2016-55 (IRS)Verified 2026-09-02
Compared with 2016
| Item | 2016 | 2017 | Change |
|---|---|---|---|
| Exclusion amount | $101,300 | $102,100 | +$800 (+0.8%) |
Who it applies to
U.S. citizens and resident aliens who live and work abroad and meet either the bona fide residence test or the physical presence test.
What changed this year, and why
For taxable years beginning in 2017, the foreign earned income exclusion amount under IRC § 911(b)(2)(D)(i) is $102,100. This is the maximum amount of foreign earned income that a qualifying individual may exclude from U.S. federal income tax.
Common questions
- What is the Foreign Earned Income Exclusion?
- Under IRC § 911, a qualifying U.S. citizen or resident alien living and working abroad may exclude up to $102,100 of foreign earned income from U.S. federal income tax for the 2017 tax year.
- Who qualifies for the exclusion?
- Taxpayers must meet either the bona fide residence test or the physical presence test and file Form 2555 or Form 2555-EZ with their federal income tax return.
Your tax home has to be in a foreign country
The IRS requires that a taxpayer’s tax home be in a foreign country as a baseline condition for claiming either the foreign earned income exclusion or the foreign housing exclusion or deduction. In addition, the taxpayer must have earned that income from personal services performed while in a foreign country. The tax-home requirement is one of three prerequisites; the other two are having foreign earned income and satisfying either the bona fide residence test or the physical presence test. If either condition - foreign tax home or foreign-source personal-service income - is missing, the taxpayer cannot claim the exclusion or deduction, regardless of how many days were spent abroad or how strong the ties to the foreign country are. These qualification rules are detailed in chapter 4 of the publication. To actually claim the benefit, the taxpayer must file Form 2555 or Form 2555-EZ with their federal income tax return.
To qualify for either of the exclusions or the deduction, you must have a tax home in a for- eign country and earn income from personal services performed in a foreign country.
Publication 54 (2017), Tax Guide for U.S. Citizens and Resident Aliens Abroad (IRS)
The bona fide residence test
The bona fide residence test is one of two tests a taxpayer can use to qualify for the foreign earned income exclusion or the foreign housing exclusion or deduction. To meet this test, you must be a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax year. Simply living abroad for a year does not automatically make you a bona fide resident; the IRS looks at the nature and depth of your ties to the foreign country. This test is available only to U.S. citizens and to U.S. resident aliens who are citizens or nationals of a country that has an income tax treaty in effect with the United States. If you meet the test, you may exclude up to $102,100 of foreign earned income for 2017. You must also have a tax home in a foreign country and earn income from personal services performed abroad. The bona fide residence test focuses on your status as a resident rather than counting days of physical presence, making it suitable for people who establish a genuine life in a foreign country over the course of a full tax year.
You meet the bona fide residence test if you are a bona fide resident of a foreign country or countries for an uninterrupted period that in- cludes an entire tax year.
Publication 54 (2017), Tax Guide for U.S. Citizens and Resident Aliens Abroad (IRS)
330 full days in any 12 months
The physical presence test is the second of two tests that qualify a taxpayer for the foreign earned income exclusion or the foreign housing exclusion or deduction. To meet this test, you must be physically present in a foreign country or countries for at least 330 full days during a 12-month period. The 330 days do not need to be consecutive. Unlike the bona fide residence test, the physical presence test does not depend on the kind of residence you establish, your intentions about returning, or the purpose of your stay abroad. Any U.S. citizen or resident alien can use it. Days spent abroad for any reason - employment, vacation, or otherwise - count toward the total. If illness, family problems, a vacation, or your employer's orders cause you to be present for fewer than the required days, you do not meet the test, though a waiver may apply if you are required to leave because of war or civil unrest. A full day is the period beginning at midnight. For 2017, a qualifying taxpayer may exclude up to $102,100 of foreign earned income.
330 full days. Generally, to meet the physical presence test, you must be physically present in a foreign country or countries for at least 330 full days during a 12-month period.
Publication 54 (2017), Tax Guide for U.S. Citizens and Resident Aliens Abroad (IRS)
The separate foreign housing exclusion
In addition to the foreign earned income exclusion, qualifying taxpayers may claim a separate foreign housing exclusion for a limited amount of income used to pay housing expenses in a foreign country. The housing exclusion applies only to employees; self-employed individuals may claim a foreign housing deduction instead. To qualify, you must meet the same basic requirements as for the earned income exclusion: your tax home must be in a foreign country, you must have foreign earned income, and you must satisfy either the bona fide residence test or the physical presence test. The amount you can exclude for housing is subject to limits that vary by location and are computed based on the exclusion amount. For 2017, the base housing amount is computed using a percentage of the maximum foreign earned income exclusion of $102,100, calculated on a daily basis and multiplied by the number of qualifying days in the tax year. Qualified housing expenses eligible for the housing exclusion have location-specific maximums. You claim the housing exclusion on Form 2555 or Form 2555-EZ along with the foreign earned income exclusion.
You may qualify to treat up to $102,100 of your income as not taxable by the United States. You also may be able to either deduct part of your housing expenses from your in- come or treat a limited amount of income used for housing expenses as not taxable by the Uni- ted States.
Publication 54 (2017), Tax Guide for U.S. Citizens and Resident Aliens Abroad (IRS)
The election sticks until you revoke it
The foreign earned income exclusion is voluntary. This means the election continues automatically into future tax years without requiring you to re-file the forms each year. You can revoke the election if you determine that it is more beneficial to claim a foreign tax credit instead, but once revoked, you generally cannot claim the exclusion again for the next five tax years without approval from the IRS. Additionally, choosing the exclusion prevents you from taking a foreign tax credit or deduction for taxes on the income you exclude. If you improperly take a credit or deduction for those excluded taxes in a subsequent year, your election for the foreign earned income exclusion is automatically revoked beginning with that year. The initial choice is made by completing the appropriate parts of Form 2555 or Form 2555-EZ. For 2017, the maximum foreign earned income exclusion is $102,100.
Once you choose to exclude your foreign earned income, that choice remains in effect for that year and all later years unless you revoke it.
Publication 54 (2017), Tax Guide for U.S. Citizens and Resident Aliens Abroad (IRS)
Not meeting a test for the whole year shrinks the exclusion
For the 2017 tax year, the IRS allows you to exclude up to $102,100 of foreign earned income, but only if you meet either the bona fide residence test or the physical presence test for your entire tax year. If you qualify for only part of the year, you must prorate the maximum exclusion based on the number of days you met either test during the year. This means your exclusion amount is reduced proportionally to reflect the portion of the year you actually qualified. The proration ensures that the exclusion accurately reflects the time you spent meeting the eligibility requirements, rather than allowing you to claim the full annual amount when you only qualified for a fraction of the year.
If you didn’t meet ei- ther of these tests for your entire tax year, you must prorate the maxi- mum exclusion based on the num- ber of days that you did meet either test during the year.
Publication 54 (2017), Tax Guide for U.S. Citizens and Resident Aliens Abroad (IRS)
Room you do not use does not carry to another year
For the 2017 tax year, the IRS limits the foreign earned income exclusion to the smaller of two amounts: $102,100, or your foreign earned income for the tax year minus your foreign housing exclusion. This means you cannot exclude more than you actually earned from foreign sources, even if the maximum exclusion amount is higher. If your foreign earned income is less than $102,100, your exclusion is limited to that lower amount. Additionally, any portion of the exclusion that you do not use in one tax year cannot be carried forward to future years. The exclusion is designed to offset actual foreign earnings, not to create a tax benefit that exceeds your income or can be saved for later use.
You cannot exclude more than the smaller of: $102,100, or Your foreign earned income (discussed earlier) for the tax year minus your foreign housing exclusion (discussed later).
Publication 54 (2017), Tax Guide for U.S. Citizens and Resident Aliens Abroad (IRS)
Revoking the choice bars you from re-electing for 5 years without IRS approval
Once you choose to claim the foreign earned income exclusion, that choice remains in effect for that year and all subsequent years unless you formally revoke it. If you decide to revoke your choice, you can do so for any year by attaching a statement to your return. However, if you revoke the exclusion and later want to claim it again within 5 years, you must apply for special approval from the IRS. This requires requesting a private letter ruling, which involves a formal application process and a fee. The IRS will consider various factors when deciding whether to grant approval, such as whether you moved back to the United States, relocated to a different foreign country, experienced changes in foreign tax laws, or changed employers. This 5-year restriction prevents taxpayers from frequently switching the exclusion on and off to optimize their tax situation year by year.
If you revoked a choice and within 5 years again wish to choose the same exclusion, you must apply for IRS approval. You do this by re- questing a ruling from the IRS.
Publication 54 (2017), Tax Guide for U.S. Citizens and Resident Aliens Abroad (IRS)
How each figure was verified
Each number below was read from a stored copy of the document named beside it, and checked to occur word for word in the quoted sentence. The digest is of that stored text.
Rev. Proc. 2016-55 (IRS)
- Exclusion amount
For taxable years beginning in 2017, the foreign earned income exclusion amount under § 911(b)(2)(D)(i) is $102,100.