Foreign earned income is pay received for personal services actually performed in a foreign country while your tax home is abroad. This includes wages, salaries, professional fees, and self-employment income. It does not matter whether the employer or payer is based in the United States or a foreign country.
It is important to contrast this with unearned or passive income. Foreign earned income does not include interest, dividends, rental income, capital gains, pensions, Social Security benefits, or US government allowances. These types of passive or deferred income do not qualify for the Foreign Earned Income Exclusion.
For the 2025 tax year, expats can exclude up to $130,000 of qualifying earned income from US income tax using Form 2555. You can learn more in our FEIE guide. However, self-employed individuals face a crucial distinction. Even if self-employment earnings are excluded from federal income tax, they remain subject to the 15.3% self-employment tax. Taxpayers should consider professional help to confirm how these rules apply to their specific financial situation.