2023 Foreign Earned Income Exclusion
The 2023 Foreign Earned Income Exclusion is $120,000.
Effective 2023-01-01Source: Rev. Proc. 2022-38 (IRS)Verified 2026-08-29
Compared with 2022
| Item | 2022 | 2023 | Change |
|---|---|---|---|
| Exclusion amount | $112,000 | $120,000 | +$8,000 (+7.1%) |
Who it applies to
U.S. citizens and resident aliens who have foreign earned income and meet the requirements of IRC Section 911, including having a tax home in a foreign country and meeting either the bona fide residence test or the physical presence test.
What changed this year, and why
The Foreign Earned Income Exclusion amount under IRC Section 911 is $120,000 for taxable years beginning in 2023.
Common questions
- What is the Foreign Earned Income Exclusion?
- The exclusion allows qualifying U.S. citizens and resident aliens living abroad to exclude from gross income up to $120,000 of foreign earned income for taxable years beginning in 2023, under Internal Revenue Code Section 911.
Your tax home has to be in a foreign country
You must satisfy three conditions to claim the foreign earned income exclusion: your tax home must be in a foreign country, you must have foreign earned income, and you must meet either the bona fide residence test or the physical presence test. Your tax home is defined as the general area of your main place of business, employment, or post of duty. It is not necessarily your residence or domicile. If you lack a regular place of business, your tax home may be where you regularly live; if you lack both, you are considered an itinerant. You are not considered to have a tax home in a foreign country during any period your abode is in the United States, with the exception of serving in support of the U.S. Armed Forces in a combat zone. The location of your abode is determined by where you maintain family, economic, and personal ties. You must maintain this foreign tax home throughout your entire period of bona fide residence or physical presence abroad to qualify for the exclusion or the separate housing exclusion.
To qualify for the foreign earned income exclusion and the foreign housing exclusion, or the foreign housing deduc- tion, your tax home must be in a foreign country through- out your period of bona fide residence or physical pres- ence abroad.
Publication 54 (2023), Tax Guide for U.S. Citizens and Resident Aliens Abroad (IRS)
The bona fide residence test
To qualify under the bona fide residence test, you must be a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax year. This test is available only to U.S. citizens and U.S. resident aliens who are citizens or nationals of a country with which the United States has an income tax treaty in effect. You do not automatically gain bona fide resident status simply by living abroad for one year. If you go to a foreign country for a specific job with a defined end date, you generally will not be considered a bona fide resident even if you remain there for a full tax year or longer. The determination considers multiple factors including the length and nature of your stay. Your bona fide residence is not necessarily your domicile - it is your permanent home to which you always return or intend to return. For example, you could maintain domicile in one location while establishing bona fide residence elsewhere if you set up permanent quarters for an indefinite or extended period.
You meet the bona fide residence test if you are a bona fide resident of a foreign country or countries for an unin- terrupted period that includes an entire tax year.
Publication 54 (2023), 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 for at least 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 to qualify for the foreign earned income exclusion and the foreign housing exclusion. You can count days spent abroad for any reason - you do not have to be in a foreign country only for employment purposes; vacation days count as well. Time spent on or over international waters while traveling to or from a foreign country does not count toward the 330-day total. If illness, family problems, a vacation, or your employer's orders cause you to be present for less than the required time, you do not meet the test, unless you are required to leave because of war or civil unrest. The 12-month period can be any consecutive 12-month period, not necessarily a calendar year. The maximum foreign earned income exclusion for 2023 is $120,000.
You meet the physical presence test if you are physically present in a foreign country or countries for 330 full days during a period of 12 consecutive months.
Publication 54 (2023), Tax Guide for U.S. Citizens and Resident Aliens Abroad (IRS)
The separate foreign housing exclusion
In addition to excluding up to $120,000 of foreign earned income for 2023, you may also be able to exclude a separate amount for housing costs from your income. The foreign housing exclusion applies only to employees, while the foreign housing deduction applies only to self-employed individuals. To claim either benefit, you must meet the same requirements as the foreign earned income exclusion, including having a tax home in a foreign country and satisfying either the bona fide residence test or the physical presence test. The housing amount is generally the excess of your qualified housing expenses over a base amount, which is calculated as a percentage of the maximum foreign earned income exclusion. The maximum amount of qualified housing expenses eligible for the exclusion or deduction may vary depending on your foreign geographic location. You must complete Form 2555 to claim the housing exclusion or deduction. Both the exclusion and deduction are explained in detail in chapter 4 of the publication.
You may also be able to either deduct part of your housing expen- ses from your income or treat a limited amount of income used for housing expenses as not taxable by the United States.
Publication 54 (2023), Tax Guide for U.S. Citizens and Resident Aliens Abroad (IRS)
The election sticks until you revoke it
You can choose to claim the foreign earned income exclusion 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 continuing - it does not require annual renewal, but it also means you cannot alternate between claiming and not claiming the exclusion without formally revoking it. Your initial choice must generally be made with a return filed by the due date (including extensions), an amended return filed within the applicable time limits, or a return filed within one year of the original due date. If you file after these periods, special rules apply depending on whether you owe tax. Once you choose the exclusion, you cannot take a foreign tax credit or deduction for taxes on income you can exclude. If you claim the exclusion, you also cannot claim the additional child tax credit or the earned income credit for that year. The maximum exclusion amount for 2023 is $120,000.
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 (2023), 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. 2022-38 (IRS)
- Exclusion amount
.39 Foreign Earned Income Exclusion. For taxable years beginning in 2023, the foreign earned income exclusion amount under ยง 911(b)(2)(D)(i) is $120,000.