Foreign Earned Income Tax Calculator

Foreign income taxation for US citizens is one of the most complex areas of international tax law. Unlike most other countries, the United States taxes its citizens and permanent residents on worldwide income — even income earned entirely in a foreign country, paid by a foreign employer, and never touching US soil.

Foreign Earned Income Exclusion (FEIE) formula:

US Taxable Foreign Income = Foreign Earned Income − FEIE Exclusion Amount

US Tax Owed = Tax on (Total Income − FEIE) calculated via "stacking method"

Foreign Tax Credit (FTC):

Net US Tax = US Tax Liability − Foreign Taxes Paid (limited to US rate)

Variable definitions:

• FEIE — Foreign Earned Income Exclusion; for tax year 2025, the exclusion is $130,000 (indexed annually for inflation)
• Stacking Method — the IRS does not tax the excluded income, but calculates your tax rate as if the excluded income still exists, pushing non-excluded income into higher brackets
• Foreign Tax Credit — a dollar-for-dollar credit for taxes paid to a foreign government, preventing double taxation on income above the FEIE threshold
• Bona Fide Residence Test — you must have established genuine residency in a foreign country for an entire tax year
• Physical Presence Test — you must have been physically present in a foreign country for at least 330 full days within any consecutive 12-month period

Worked example: American expat earns $185,000 in Germany in 2025. German income tax paid: $52,000. FEIE exclusion: $130,000. US taxable income = $185,000 − $130,000 = $55,000 US tax calculated on the $55,000 “stacked” above the excluded amount (this pushes into higher brackets than $55,000 alone would suggest). Approximate US tax before credits: $9,000–$12,000 German taxes paid on the $55,000 portion: ~$15,000 Foreign Tax Credit applied: reduces US tax to $0 (FTC exceeds US liability on remaining income)

FEIE qualification checklist:

• ☐ Have foreign earned income (wages, self-employment, freelance — not investments)
• ☐ Tax home is in a foreign country
• ☐ Meet either the Bona Fide Residence Test or Physical Presence Test
• ☐ File Form 2555 with your US tax return (Form 1040)

Key pitfalls:

• Self-employment income abroad is still subject to US self-employment tax (15.3%) even when excluded from income tax via FEIE
• The FEIE does not apply to passive income (interest, dividends, capital gains)
• Some US expats must also file FBAR (FinCEN 114) if foreign bank accounts exceed $10,000 at any point during the year
• FATCA reporting may be required for foreign financial assets above $50,000

This is a simplified overview. Expat taxation is highly fact-specific — consult a qualified international tax professional for personalized advice.