What is the Foreign Earned Income Exclusion and who can actually use it?

The Foreign Earned Income Exclusion (FEIE) lets qualifying U.S. citizens and resident aliens exclude a large chunk of income earned while living and working abroad—up to $130,000 for 2025. It's claimed on Form 2555 and applies only to earned income like wages and self-employment, not to investment income. To qualify you must have a foreign tax home and meet either the bona fide residence test or the physical presence test (330 full days abroad in a 12-month period). This is the opposite situation from most newcomers: it helps Americans posted overseas, not immigrants earning inside the U.S. If you're an immigrant working in the U.S., the FEIE won't apply to your U.S. wages. If you split a year between the U.S. and a foreign assignment, the Foreign Tax Credit may serve you better, so compare both before choosing.