2018 Foreign Earned Income Exclusion
The 2018 Foreign Earned Income Exclusion is $103,900.
Effective 2018-01-01Source: Rev. Proc. 2018-18 (Internal Revenue Bulletin 2018-10) (IRS)Verified 2026-08-29
Compared with 2017
| Item | 2017 | 2018 | Change |
|---|---|---|---|
| Exclusion amount | $102,100 | $103,900 | +$1,800 (+1.8%) |
Who it applies to
U.S. citizens and resident aliens who live and work abroad and qualify for the Foreign Earned Income Exclusion under IRC § 911
What changed this year, and why
For taxable years beginning in 2018, the Foreign Earned Income Exclusion under IRC § 911(b)(2)(D)(i) is $103,900.
Common questions
- What is the Foreign Earned Income Exclusion?
- It is a provision of the Internal Revenue Code (Section 911) that allows qualifying U.S. citizens and resident aliens living abroad to exclude a set amount of foreign earned income from their U.S. gross income.
- How much can be excluded for 2018?
- For taxable years beginning in 2018, the maximum exclusion is $103,900.
Your tax home has to be in a foreign country
The tax home is the general area of your main place of business, employment, or post of duty, regardless of where your family home is located. To claim either the foreign earned income exclusion or the foreign housing exclusion or deduction, your tax home must be in a foreign country throughout the entire period you are trying to qualify under. Your tax home is the place where you are permanently or indefinitely engaged to work. The existence of one or more foreign countries as your tax home is a basic requirement for the tax benefits discussed in this publication. Without a tax home in a foreign country, you cannot meet the requirements for the exclusion or deduction, even if you otherwise satisfy the bona fide residence test or physical presence test.
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 (2018), Tax Guide for U.S. Citizens and Resident Aliens Abroad (IRS)
The bona fide residence test
The bona fide residence test requires you to be a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax year. An entire tax year means January 1 through December 31 for a calendar-year taxpayer. You can use this test to qualify for the exclusions and the deduction only if you are either a U.S. citizen, or a U.S. resident alien who is a citizen or national of a country with which the United States has an income tax treaty in effect. You do not automatically acquire bona fide resident status merely by living in a foreign country for a year. Your status depends on the type of abode you establish and your intentions about remaining there. The IRS considers factors such as your purpose for being abroad, the nature and length of your stay, and whether you maintain a home in the United States.
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 (2018), Tax Guide for U.S. Citizens and Resident Aliens Abroad (IRS)
330 full days in any 12 months
You meet the physical presence test if you are physically present in a foreign country or countries 330 full days during a period of 12 consecutive months. The 330 days do not have to be consecutive, and any U.S. citizen or resident alien can use this test regardless of the type of residence established abroad or the purpose of the stay. A full day means a full period of time from midnight to midnight. Days spent abroad for any reason, including vacation, count toward the total. The 12-month period can begin with any day, and it need not align with the calendar year or your tax year. Meeting this test allows you to claim the foreign earned income exclusion of up to $103,900 for 2018, as well as the foreign housing exclusion or deduction, provided your tax home is in a foreign country throughout the period.
You meet the physical presence test if you are physically present in a foreign country or coun- tries 330 full days during a period of 12 consec- utive months.
Publication 54 (2018), Tax Guide for U.S. Citizens and Resident Aliens Abroad (IRS)
The separate foreign housing exclusion
The foreign housing exclusion provides an additional tax benefit beyond the foreign earned income exclusion. If you meet the requirements for the foreign earned income exclusion, you may be able to exclude from income a limited amount of income used for housing expenses in a foreign country. The housing exclusion applies only to employees; self-employed individuals may claim the foreign housing deduction instead. To qualify, you must have a tax home in a foreign country, have foreign earned income, and meet either the bona fide residence test or the physical presence test. The amount you can exclude is based on your qualified housing expenses, which include rent, utilities, and certain other costs related to housing, but not the cost of buying a home or home improvements. The maximum foreign earned income exclusion for 2018 is $103,900, and the housing exclusion provides a separate benefit calculated on top of that amount.
To claim the foreign earned income exclusion, the foreign housing exclusion, or the foreign housing deduction, you must meet all three of the following requirements.
Publication 54 (2018), Tax Guide for U.S. Citizens and Resident Aliens Abroad (IRS)
The election sticks until you revoke it
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. This means the election is ongoing and continues until you actively revoke it. You make the initial choice by completing the appropriate parts of Form 2555 or Form 2555-EZ with your timely filed return. If you revoke the election, there are restrictions on when you can claim the exclusion again. Additionally, once you choose to exclude foreign earned income, you cannot take a foreign tax credit or deduction for taxes on income you can exclude. If you do take a credit or deduction for any of those taxes in a later year, your election for the foreign earned income exclusion will be revoked beginning with that year. The foreign earned income exclusion amount for 2018 is $103,900.
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 (2018), 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. 2018-18 (Internal Revenue Bulletin 2018-10) (IRS)
- Exclusion amount
For taxable years beginning in 2018, the foreign earned income exclusion amount under § 911(b)(2)(D)(i) is $103,900.