United States · Federal · Expats and overseas work
Foreign earned income exclusion 2027.
How much of your 2027 foreign wages you can exclude from U.S. tax, and how the amount shrinks when you qualify for only part of the year.
Short answer: For taxable years beginning in 2027 the foreign earned income exclusion is $137,300 per person, up from $132,900 for 2026. It is computed daily, $376.16 for each qualifying day in a 365-day year, so a partial year gives a smaller cap. Spouses who both qualify can each claim their own exclusion.
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Result
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How the exclusion works
Section 911 lets a qualifying individual exclude foreign earned income up to an annual amount. To qualify you need a tax home in a foreign country and either to be a bona fide resident of a foreign country for a full tax year or to be physically present in foreign countries for at least 330 full days in a period of 12 consecutive months. The annual amount is indexed to inflation; Revenue Procedure 2026-35 sets it at $137,300 for 2027. Section 911(b)(2)(A) caps the exclusion at the foreign earned income "computed on a daily basis at an annual rate" equal to that amount, so a year in which you qualify for only 200 days has a cap of 200 divided by 365 of the full figure.
Stacking: the excluded income still sets your rate
Excluding income does not let the rest fall into the low brackets. Under section 911(f) the tax on your remaining income is figured as if the excluded amount were added back, so the remaining income is taxed at the higher rates it would have faced. The exclusion removes the income from tax, but it does not reset the bracket your other income starts in. A foreign tax credit and the exclusion cannot be applied to the same income; the page on choosing between them is linked below.
Housing amounts are separate
The foreign housing exclusion or deduction is computed from a separate base and cap that are not part of Revenue Procedure 2026-35. This page does not state a housing figure; use the IRS notice that sets it, and Form 2555 instructions, when you file.
What changed from 2026
The 2027 exclusion is $137,300, an increase of $4,400 over the $132,900 for 2026. The per-day amount rises from $364.11 to $376.16 in a 365-day year. The qualifying tests, the 330-day rule and the 12-month window are statutory and did not change.
Worked example (2027)
A consultant earns $90,000 of foreign earned income and qualifies for 200 days in 2027. The cap is $137,300 times 200 divided by 365, which is $75,232.88. The exclusion is the lesser of the income and the cap, so $75,232.88 is excluded and $14,767.12 stays taxable. A worker who qualifies all year with $150,000 of foreign earned income excludes the full $137,300 and has $12,700 left to tax. A worker with $60,000 and a full year excludes all $60,000, because income is below the cap.
Common mix-ups
- The cap is per person. A married couple who each qualify can each exclude up to $137,300 of their own earnings.
- Only earned income counts. Investment income, pensions and most rental income are not foreign earned income.
- A partial year prorates. The cap is daily, so 200 qualifying days is 200 over 365 of $137,300.
- It is elected, not automatic. You claim it on Form 2555 with a return; once chosen, revoking it has a five-year rule.
- It does not reduce self-employment tax. The exclusion removes the income from income tax, not from the self-employment tax base.
Method
The calculator divides $137,300 by 365 for the daily rate, multiplies by the qualifying days you enter (capped at 365), and compares the result with your foreign earned income. The exclusion is the lesser of the two. It does not test whether you qualify, apply the stacking rule, or compute housing amounts. Figures were read on November 9, 2026.
What this does not cover
- Whether you meet the bona fide residence or physical presence test.
- The foreign housing exclusion and deduction.
- The stacking calculation under section 911(f) and the alternative minimum tax effects.
- State tax treatment of foreign earned income, which varies.
Figures read from the sources below on November 9, 2026. Last updated November 9, 2026.
Sources
- IRS Revenue Procedure 2026-35, section 3.41 (foreign earned income exclusion) (retrieved November 9, 2026)
- IRS Revenue Procedure 2025-32, section 4.39 (the 2026 amount) (retrieved November 9, 2026)
- 26 U.S.C. section 911 (citizens or residents of the United States living abroad), text at Cornell Legal Information Institute (retrieved November 9, 2026)
- IRS news release IR-2026-133, November 5, 2026 (retrieved November 9, 2026)
Frequently asked questions
What is the 2027 foreign earned income exclusion?
It is $137,300 for taxable years beginning in 2027, under IRS Revenue Procedure 2026-35 section 3.41.
What was it in 2026?
The 2026 amount is $132,900, so the 2027 figure is $4,400 higher.
How is a partial year handled?
The exclusion is capped at the foreign earned income computed daily at the annual rate, so you multiply $137,300 by qualifying days over 365.
Do both spouses get the exclusion?
Yes, if each qualifies, each can exclude up to the annual amount on their own foreign earned income.
Does the exclusion lower my tax rate on the rest?
No. Under the stacking rule in section 911(f) the remaining income is taxed as if the excluded income were added to it.
Does this include housing costs?
No. The housing exclusion or deduction uses a separate base and cap not in this revenue procedure.
Can I use the exclusion and the foreign tax credit together?
Not on the same income. See the comparison page linked in the related tools.
Not legal or tax advice
This page is general information from an unofficial guide, not legal, payroll or tax advice. Tax law changes and your facts may differ. Confirm figures with the IRS or a tax professional before you file or set payroll. Nothing you type is sent anywhere.