What is the Foreign Earned Income Exclusion amount for 2025?

The FEIE lets you exclude up to $130,000 of foreign earned income for tax year 2025 (indexed annually). 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 any 12-month period).

Can I claim both the Foreign Tax Credit and the FEIE?

Yes, but not on the same dollar of income. You can exclude income up to the FEIE limit on Form 2555 and then claim a Foreign Tax Credit on Form 1116 for foreign taxes paid on income above the exclusion. You cannot take a credit for taxes on income you already excluded.

Which is better if I live in a high-tax country?

The Foreign Tax Credit usually wins in a high-tax country. If your foreign tax rate exceeds the US rate, the credit can offset your entire US liability and leave carryover credits for future years — while also preserving earned income for IRA contributions and the Child Tax Credit, which the exclusion can reduce or eliminate.

What happens if I revoke the Foreign Earned Income Exclusion?

Once you revoke the FEIE, you generally cannot claim it again for five tax years without IRS approval. Because the choice is sticky, run the numbers before switching from the exclusion to the credit — a one-year tax saving can lock you out of the exclusion for half a decade.

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International Tax

Foreign Tax Credit vs. Foreign Earned Income Exclusion: Which Saves You More?

US citizens abroad are taxed on worldwide income — but two tools can wipe out most or all of the double tax. Choosing the wrong one can cost thousands and lock you out for five years.

SMAART Tax Team

February 10, 2026

7 min read

|Reviewed by Ray Dominguez, EA, USTCP