Foreign Earned Income Exclusion (FEIE)
A tax provision allowing qualifying US citizens and residents living abroad to exclude a portion of foreign-earned wages and self-employment income from US taxation.
Detailed Explanation
Claimed on Form 2555, the FEIE excludes up to $130,000 (2025 inflation-adjusted) of foreign earned income per qualifying taxpayer. Eligibility requires meeting either the Bona Fide Residence Test (a tax year of foreign residency) or the Physical Presence Test (330 full days outside the US in any 12-month period) and having a tax home outside the US. The FEIE does not exclude self-employment tax, only income tax. Taxpayers can also claim a separate Foreign Housing Exclusion for excess housing costs.
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Foreign Tax Credit (FTC)
A dollar-for-dollar credit on the US tax return for income taxes paid to a foreign country, designed to prevent double taxation.
Form 1040 (US Individual Income Tax Return)
The annual federal income tax return filed by US citizens and resident aliens to report income, deductions, credits, and tax liability.
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