2025 Foreign Earned Income Exclusion
The 2025 Foreign Earned Income Exclusion is $130,000.
Effective 2025-01-01Source: Rev. Proc. 2024-40 (IRS)Verified 2026-08-29
Compared with 2024
| Item | 2024 | 2025 | Change |
|---|---|---|---|
| Exclusion amount | $126,500 | $130,000 | +$3,500 (+2.8%) |
Who it applies to
The exclusion is claimed by an individual whose income is earned abroad and who meets the qualifying tests in § 911. Rev. Proc. 2024-40 does not restate those tests. What it fixes is how much foreign earned income the exclusion can reach for taxable years beginning in 2025: $130,000. Foreign earned income above that ceiling is not covered by this provision, and the revenue procedure states no larger figure for any category of taxpayer, no separate amount for a joint return, and no foreign housing amount alongside it. Because the item is stated for taxable years beginning in 2025 rather than under the revenue procedure's calendar year rule, a taxpayer whose taxable year is not the calendar year uses $130,000 for the taxable year that begins in 2025.
What changed this year, and why
Rev. Proc. 2024-40 sets the foreign earned income exclusion amount under § 911 at $130,000 for taxable years beginning in 2025. That single figure is the whole of what the revenue procedure states about § 911: it adjusts the ceiling, and leaves the residence and physical presence tests, the definition of foreign earned income and every other element of the exclusion to the Code. The adjustment is generally determined by reference to § 1(f), and the amount is stated for the Code as in effect on October 22, 2024.
Common questions
- What is the foreign earned income exclusion for 2025?
- It is $130,000 for taxable years beginning in 2025. Rev. Proc. 2024-40 states the figure as the foreign earned income exclusion amount under § 911, adjusted for inflation. The revenue procedure sets the ceiling and nothing else about the provision, so how much of that ceiling an individual can actually use depends on the qualifying rules in § 911 and on how much foreign earned income there is.
- What happens to foreign income above $130,000?
- It falls outside this exclusion. Rev. Proc. 2024-40 fixes $130,000 as the foreign earned income exclusion amount under § 911 for taxable years beginning in 2025, so that figure is a ceiling on what the exclusion can reach rather than a threshold at which it begins. The revenue procedure does not describe how income above the ceiling is treated; that follows from the Code.
- Who qualifies for the foreign earned income exclusion?
- The revenue procedure does not say. It states only the inflation-adjusted amount, $130,000 under § 911 for taxable years beginning in 2025, and leaves the qualifying conditions to that Code section. Anyone checking eligibility needs § 911 itself rather than this document, which is confined to the annual dollar adjustment and does not restate the tests an individual has to meet.
- Is the $130,000 exclusion per person or per tax return?
- Rev. Proc. 2024-40 states a single foreign earned income exclusion amount under § 911 for taxable years beginning in 2025 and does not break it out by filing status. There is no separate joint figure in the revenue procedure and no larger amount for any category of taxpayer. How the amount applies where both spouses have foreign earned income is governed by § 911, not by this document.
- Does the foreign earned income exclusion include housing costs?
- Rev. Proc. 2024-40 states no housing amount. Its foreign earned income exclusion item gives one figure, $130,000 under § 911 for taxable years beginning in 2025, and stops there. Any housing element of § 911 is neither adjusted nor described in this revenue procedure, so the $130,000 should be read as the exclusion amount alone and not as a combined income and housing allowance.
- Which tax year does the $130,000 exclusion apply to?
- Taxable years beginning in 2025. Rev. Proc. 2024-40 states that as its general effective rule and reserves a calendar year rule for a listed group of items that does not include the foreign earned income exclusion. An expatriate whose taxable year is not the calendar year therefore applies $130,000 to the taxable year that begins in 2025 rather than to a calendar year of residence abroad.
- Is the foreign earned income exclusion adjusted for inflation each year?
- Yes. Rev. Proc. 2024-40 lists the foreign earned income exclusion among the inflation-adjusted items it sets out for 2025, and states that those items are generally determined by reference to § 1(f). The revenue procedure also cautions that if amendments to the Code are enacted for 2025 after October 22, 2024, taxpayers should consult additional guidance on whether the adjustment still applies.
- Where does the 2025 foreign earned income exclusion amount come from?
- From section 2.39 of Rev. Proc. 2024-40, headed foreign earned income exclusion. The revenue procedure sets out inflation-adjusted items for 2025 for various Code provisions as in effect on October 22, 2024, and this item states the exclusion amount under § 911 as $130,000 for taxable years beginning in 2025. No other document is needed for the figure itself.
Every amount on this page is a published figure rather than yours. The Foreign earned income exclusion headroom takes the number you enter and works it out against them, showing which published figure it used.
Your tax home has to be in a foreign country
To claim the foreign earned income exclusion, you must have a tax home in a foreign country or countries. Your tax home is generally your principal place of business, employment, or post of duty, regardless of where you maintain your family home. This requirement is separate from the bona fide residence test and physical presence test. You must meet the tax home requirement throughout your period of bona fide residence or physical presence. If your tax home is in the United States, you cannot claim the exclusion even if you spend significant time abroad. The concept of tax home is based on where you regularly or principally work, not necessarily where your family resides. For more detailed information about what qualifies as a tax home, the IRS provides guidance at IRS.gov/FEIE-TaxHome.
1. Tax home. You must have a tax home in a foreign country (or countries). Generally, your tax home is your principal place of business, employment, or post of duty, regardless of where you maintain your family home.
Publication 54 (2025), Tax Guide for U.S. Citizens and Resident Aliens Abroad (IRS)
The bona fide residence test
To qualify for the foreign earned income exclusion, you must meet either the bona fide residence test or the physical presence 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. This test is only available to U.S. citizens or 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 acquire bona fide resident status merely by living in a foreign country for one year. The determination depends on factors such as the type of housing you occupy, whether your family accompanied you, your visa type, your employment agreement, and other factors showing your intention to remain in that country for an extended period.
a. Bona fide residence. You must be a bona fide resident of a foreign country (or countries) for an uninterrupted pe- riod that includes an entire tax year.
Publication 54 (2025), Tax Guide for U.S. Citizens and Resident Aliens Abroad (IRS)
330 full days in any 12 months
The physical presence test offers an alternative path to qualifying for the foreign earned income exclusion. Under this test, U.S. citizens and resident aliens must be physically present in a foreign country or countries for 330 full days during any period of 12 consecutive months. The 330 days do not have to be consecutive, and the test is based solely on how long you stay in a foreign country. Unlike the bona fide residence test, the physical presence test does not depend on the type of residence you establish, your intentions about returning to the United States, or the nature and purpose of your stay abroad. This means you can qualify based purely on the number of days present, regardless of whether you established a permanent home or intend to return. The 12-month period can begin or end in different tax years, and the $130,000 exclusion amount applies to income earned during days you meet this test.
b. Physical presence. Alternatively, U.S. citizens and res- ident aliens must be physically present in a foreign country (or countries) for 330 full days during a period of 12 con- secutive months. The 330 days don’t have to be consecu- tive.
Publication 54 (2025), Tax Guide for U.S. Citizens and Resident Aliens Abroad (IRS)
The separate foreign housing exclusion
In addition to the foreign earned income exclusion, you may be eligible for a separate foreign housing exclusion. This exclusion allows you to exclude from income a limited amount of housing expenses that you pay for living in a foreign country. The housing exclusion applies to amounts your employer pays or reimburses for housing costs, such as rent, utilities, and certain other housing-related expenses. The exclusion is limited to a percentage of the foreign earned income exclusion amount, minus a base housing figure. To claim the foreign housing exclusion, you must first qualify for the foreign earned income exclusion by having a tax home in a foreign country and meeting either the bona fide residence test or the physical presence test. The housing exclusion is claimed on Form 2555 along with the foreign earned income exclusion. If your employer provides housing allowances, the housing exclusion can shelter that income from U.S. taxation up to the applicable limits.
You may also be able to ei- ther 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 United States. These ben- efits are called the foreign earned income exclusion and the foreign housing deduction and exclusion.
Publication 54 (2025), Tax Guide for U.S. Citizens and Resident Aliens Abroad (IRS)
The election sticks until you revoke it
Once you choose the foreign earned income exclusion election or foreign housing exclusion election, that choice remains in effect for that year and all later years unless you revoke it. This means you must make the same choice in each subsequent year. If you fail to make the same choice in a later year, it will be considered a revocation of your election. Once revoked, you cannot claim the exclusion again for the next five tax years without IRS approval. The election is made by attaching Form 2555 to your federal income tax return or amended return. If you decide to revoke your election, you must file a statement with your return explaining the revocation. This rule prevents taxpayers from switching between claiming the exclusion and taking foreign tax credits on a year-by-year basis without consequences.
Once you choose the foreign earned income exclusion election or foreign housing exclusion election, that choice remains in effect for that year and all later years unless you revoke it. This means you must make the same choice in a subsequent year. Otherwise, it will be considered as a revocation of your foreign earned income exclusion elec- tion or foreign housing exclusion election for that year.
Publication 54 (2025), 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. 2024-40 (IRS)
- Exclusion amount
.39 Foreign Earned Income Exclusion. For taxable years beginning in 2025, the foreign earned income exclusion amount under § 911(b)(2)(D)(i) is $130,000.