What Is the FEIE Stacking Rule and How Does It Affect My Tax Bracket?
The FEIE stacking rule means that income above the $130,000 exclusion (2025 Tax Year) is taxed at the rate that would apply if the excluded income were still in the calculation. Your first dollar above the exclusion is not taxed at 10%. It is taxed at whatever bracket the excluded income pushed you into, typically 22% or 24% (IRS: Foreign Earned Income Exclusion).
How stacking works:
| Income | Without FEIE | With FEIE + Stacking |
|---|---|---|
| First $11,925 | 10% | Excluded (FEIE) |
| $11,926 – $48,475 | 12% | Excluded (FEIE) |
| $48,476 – $103,350 | 22% | Excluded (FEIE) |
| $103,351 – $130,000 | 24% | Excluded (FEIE) |
| $130,001 – $197,300 | 24% | Taxed at 24% (stacking) |
| $197,301+ | 32% | Taxed at 32% (stacking) |
Example: An expat earning $180,000 excludes $130,000 under the FEIE. The remaining $50,000 is taxed as if it were dollars $130,001 through $180,000, landing in the 24% bracket. Without stacking, that $50,000 would start at 10% and produce roughly $5,500 in tax. With stacking, it produces roughly $12,000 in tax.
Where the stacking rule appears: the IRS Form 1040 instructions include the “Foreign Earned Income Tax Worksheet” for line 16. This worksheet automatically applies the stacking calculation.
When stacking does NOT apply:
- Long-term capital gains and qualified dividends are taxed at preferential rates (0%, 15%, 20%) and are not subject to the stacking rule
- FTC users do not face stacking because the FTC does not exclude income from the bracket calculation
- Self-employment tax is calculated on Schedule SE without regard to stacking
For more, see our FEIE vs Foreign Tax Credit.
Last updated on April 29, 2026
