US Expat Tax Optimizer (FEIE Form 2555 vs FTC Form 1116)

US expats: FEIE (Form 2555) or foreign tax credit (Form 1116)?

A US citizen living abroad remains taxable in the United States and can either exclude foreign wages up to $132,900 in 2026 (FEIE, Form 2555) or offset foreign tax paid against US tax (FTC, Form 1116). The tool compares the US tax left under each option: in a high-tax country such as France, the credit usually wipes out the US tax on wages.

The two options

• FEIE: if you spent at least 330 days outside the US, the tool excludes up to $132,900 of wages, plus housing costs above $21,264 (16% of the cap), counted up to $39,870 (30% of the cap). Remaining wages and investment income are taxed at 24% (22% for married couples).
• FTC: US tax on worldwide income (same rate) is reduced by foreign tax, estimated from an average rate the tool assigns to each country (France 35%, Germany 38%, UK 32%, Switzerland 25%, UAE 0%…). The credit is limited to the US tax on foreign wages (gross tax × wages ÷ worldwide income); the excess is shown as a carryover.

Example (default values)

$145,000 salary in France, single, $32,000 housing, 340 days abroad, $8,000 investment income. FEIE: $143,636 excluded (132,900 + 10,736 housing), $9,364 taxable, so $2,247.36 of US tax. FTC: $36,720 gross US tax; the credit is limited to the tax on the $145,000 of wages, i.e. $34,800 of the $50,750 of French tax. That leaves $1,920 to pay (the tax on investment income) and $15,950 of excess credit. In the UAE (0%), the FEIE wins: $2,247.36 against $36,720.

Limits

• Single federal rate of 24% or 22%, with no brackets or standard deduction: this is not the exact tax.
• Investment income is treated as US-source: the credit does not cover it, and the Form 1116 income categories are not separated.
• The higher housing caps for high-cost cities (annual IRS notice) are not applied, and the bona fide residence test is not offered.
• Country rates are the tool's assumptions, not official schedules. Estimate only, not tax advice.

Sources and dates: $132,900 FEIE limit for 2026, IRS release IR-2025-103 of 09/10/2025 (Rev. Proc. 2025-32); 16% housing base under section 911 of the Internal Revenue Code; effective 01/01/2026 (checked on 14/10/2026).

Frequently Asked Questions

What is the FEIE limit for 2026?

$132,900 of foreign earned income per person for 2026 (IRS, IR-2025-103). A housing exclusion comes on top for costs above a $21,264 base (16% of the limit); the tool counts housing costs up to the general $39,870 cap (30% of the limit), without the higher caps for high-cost cities.

FEIE or foreign tax credit: which should I choose?

In a country where tax exceeds US tax, the FTC usually cancels the US tax on wages: with the defaults in France, $1,920 remains (tax on investment income) against $2,247.36 under the FEIE. In a country with no income tax such as the UAE, the FEIE is better ($2,247.36 against $36,720 in the tool).

What if I spend fewer than 330 days abroad?

The tool treats the physical presence test (330 full days in 12 months) as failed and grants no exclusion: at 300 days, FEIE tax rises to $36,720. The bona fide residence test, the other route to the FEIE, is not modelled.

Is the US tax shown exact?

No, it is a ballpark figure: the tool applies a single 24% rate (22% for couples) with no brackets or standard deduction, and an average foreign tax rate per country. Choosing between FEIE and FTC has multi-year consequences, so confirm it with a professional.

Is this tool really free?

Yes, all tools on Kristools are 100% free and accessible without registration.

Is my data protected?

Yes. All processing is performed directly and securely inside your browser. No personal data is sent to our servers.