Does passive income, rental income, or Social Security count toward the FEIE?
The Foreign Earned Income Exclusion (FEIE) covers foreign-earned compensation for personal services performed abroad, including wages, salary, professional fees, self-employment income, and cash-value fringe benefits. Passive income, pensions, Social Security, and U.S.-source compensation do not qualify regardless of where you live.
What qualifies as foreign-earned income:
- Wages and salaries for work performed while physically in a foreign country
- Self-employment net earnings from services performed abroad
- Professional fees (consulting, freelance, creative services)
- Commissions and bonuses earned for foreign services
- Tips from foreign service
- Cash-value benefits: housing allowances, cost-of-living adjustments, education allowances, car allowances
What does not qualify:
| Income type | FEIE? |
| Interest and dividends | No |
| Capital gains | No |
| Rental income | No |
| Pensions and annuities | No |
| U.S. Social Security benefits | No |
| Royalties (usually passive) | Generally no |
| Compensation paid by the U.S. government | No |
| Income earned in international waters or airspace | No |
| U.S.-source wages (work performed in the U.S.) | No |
Limits and caps:
- $130,000 exclusion per qualifying person for tax year 2025
- $132,900 for 2026
- Married couples each claim separately if both qualify, doubling to $260,000 (2025)
- Foreign Housing Exclusion stacks on top for housing expenses above a base amount
Elections and revocation:
- FEIE is elected on Form 2555 attached to Form 1040
- Once elected, exclusion continues automatically until revoked
- Revocation locks you out for 5 years unless IRS consent is obtained
For more on qualifying income, see our Foreign Earned Income Exclusion.
Last updated on April 29, 2026
