Can I Claim FEIE If I Work for a US Company Abroad?
Yes — FEIE is determined by where you perform the work, not by who pays you. If you're physically in a foreign country when you do the work, the income qualifies for FEIE up to $132,900 (2026), regardless of whether your employer is US-based or foreign. You still owe Social Security/Medicare to the US.
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The technical mechanism
FEIE qualifies "foreign earned income" — defined as compensation for personal services performed in a foreign country. The IRS is concerned with location of work performance, not location of the payer.
So: a US W-2 employee living and working from Lisbon, paid by their US employer in dollars to a US bank account, qualifies for FEIE on income earned during foreign-country work performance.
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The qualifying tests
You must pass either:
1. Physical Presence Test — 330 full days in a foreign country during any 12-month period. Travel days don't count. This is the mechanical option most W-2 remote workers use.
2. Bona Fide Residence Test — actual year-round residence in a foreign country, including filing as a tax resident there. More flexible (allows brief US visits) but requires deeper integration with the host country.
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What FEIE doesn't cover
- Self-employment tax (15.3% Social Security/Medicare) — applies separately, doesn't get excluded
- State tax — federal-only, your state may still claim worldwide income
- Investment income, rental income, dividends — all "unearned" income, fully taxable
- Income earned during US visits — even if your employer is foreign
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What W-2 remote workers should also check
- State residency — California, NY, NM, VA stay sticky even when you leave
- Pension/401(k) deductions — pre-tax retirement contributions don't always interact cleanly with FEIE
- Health insurance — losing US-based plan when relocating mid-year can complicate the deduction calculations
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The practical answer
If you're a US W-2 employee abroad doing remote work for your US employer, FEIE applies. The bigger question is whether FEIE or the Foreign Tax Credit produces the better outcome — and that depends entirely on your host country's tax rate.
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For the full FEIE rules, see [the FEIE guide for expats and remote workers](/blog/foreign-earned-income-exclusion-expats-remote-workers).
For a personalized US-employer-abroad tax roadmap: [the Capacity Read](/capacity-read).
Editorial note: SimplySolvd uses AI-assisted research and writing tools in content creation. All posts are reviewed and edited for accuracy before publication. Financial content is educational only and not professional advice.
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