2020 Foreign Earned Income Exclusion
The 2020 Foreign Earned Income Exclusion is $107,600.
Effective 2020-01-01Source: Rev. Proc. 2019-44 (IRS)Verified 2026-08-29
Compared with 2019
| Item | 2019 | 2020 | Change |
|---|---|---|---|
| Exclusion amount | $105,900 | $107,600 | +$1,700 (+1.6%) |
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 2020, the foreign earned income exclusion under IRC § 911(b)(2)(D)(i) is $107,600.
Common questions
- How much foreign earned income can a qualifying taxpayer exclude from gross income for 2020?
- The exclusion is $107,600 per qualifying taxpayer for taxable years beginning in 2020.
- Who can claim the Foreign Earned Income Exclusion?
- Form 2555 (Foreign Earned Income) is generally used to claim the exclusion. A taxpayer must have foreign earned income and must have a tax home in a foreign country, and must meet either the bona fide residence test or the physical presence test.
Your tax home has to be in a foreign country
To claim any of the foreign tax benefits - the foreign earned income exclusion, the foreign housing exclusion, or the foreign housing deduction - you must maintain a tax home in a foreign country for the entire period you rely on to qualify. Your tax home is generally the main area of your work or post of duty, not where your family lives. If your abode (your family, economic, and personal ties) remains in the United States, you are not considered to have a foreign tax home and cannot claim the exclusion, even while living abroad. This requirement applies whether you qualify under the bona fide residence test or the physical presence test. The tax home must be in a foreign country throughout that entire qualifying period.
To qualify for the foreign earned income exclu- sion, the foreign housing exclusion, or the for- eign housing deduction, your tax home must be in a foreign country throughout your period of bona fide residence or physical presence abroad.
Publication 54 (2020), Tax Guide for U.S. Citizens and Resident Aliens Abroad (IRS)
The bona fide residence test
The bona fide residence test requires that you be a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax year. A tax year is generally the calendar year, but it can be a different period if you use a fiscal year. Simply living abroad for a year is not enough; the IRS looks at the length of your stay, the nature of your job, and whether you have established permanent quarters for yourself and your family in 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 with the United States. If you meet this test, along with having a foreign tax home and foreign earned income, you can exclude up to $107,600 of foreign earned income for 2020.
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 (2020), Tax Guide for U.S. Citizens and Resident Aliens Abroad (IRS)
330 full days in any 12 months
The physical presence test requires that you be physically present in a foreign country or countries for 330 full days during a period of 12 consecutive months. The 12-month period can begin with any day and ends the day before the same date 12 months later. The 330 days do not have to be consecutive, and you can count days spent abroad for any reason - work, vacation, or family. Time spent on or over international waters while traveling to or from a foreign country does not count toward the total. Unlike the bona fide residence test, the physical presence test is available to any U.S. citizen or resident alien and does not depend on the kind of residence you establish or your intentions about returning. If you meet this test, you can exclude up to $107,600 of foreign earned income for 2020.
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 (2020), 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 also exclude or deduct certain housing expenses. The foreign housing exclusion applies to employees and allows them to treat a limited amount of income used for housing expenses as not taxable by the United States. The foreign housing deduction applies to self-employed individuals and allows them to deduct part of their housing expenses from income. The amount of qualified housing expenses eligible for the housing exclusion or deduction is subject to a limit that varies by location. The base housing amount is calculated as a percentage of the exclusion amount, figured on a daily basis, multiplied by the number of qualifying days in the year. This base amount is subtracted from your actual housing expenses to determine the excludable or deductible portion.
You may also 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 (2020), Tax Guide for U.S. Citizens and Resident Aliens Abroad (IRS)
The election sticks until you revoke it
The election to claim the foreign earned income exclusion is voluntary and is made by completing the appropriate parts of Form 2555. 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 not a one-time decision that expires; it carries forward automatically. If you revoke the election, you generally cannot claim the exclusion again for several tax years without IRS approval. Additionally, once you choose to exclude foreign earned income, you cannot take a foreign tax credit or deduction for taxes on the income you exclude. If you do take a credit or deduction for those taxes in a later year, your election for the foreign earned income exclusion is automatically revoked beginning with that year.
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 (2020), 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. 2019-44 (IRS)
- Exclusion amount
.39 Foreign Earned Income Exclusion. For taxable years beginning in 2020, the foreign earned income exclusion amount under § 911(b)(2)(D)(i) is $107,600.