How the FEIE works

To claim the FEIE you must: (1) have earned income from foreign sources (wages or self-employment income earned outside the U.S.); (2) have your "tax home" in a foreign country; and (3) meet either the physical presence test (330 days in a foreign country during a 12-month period) or the bona fide residence test (you are a genuine resident of a foreign country for an uninterrupted period including a full calendar year).

Qualifying income is excluded from U.S. taxable income — you still file a return, but the excluded amount does not generate U.S. federal income tax. The exclusion is per-person, so a married couple can each claim it. Note that only earned income qualifies; passive income (dividends, interest, capital gains, rental income) is not excludable under the FEIE regardless of where you live.

FEIE vs. Beckham Law: which to use in Spain

This is the most important planning decision for Americans who move to Spain on the Digital Nomad Visa. The two regimes are generally not compatible, and in most cases you will be choosing one or the other:

  • FEIE strategy: Live in Spain, claim physical presence or bona fide residence, exclude up to ~$130,000 from U.S. tax. You remain a Spanish tax resident paying Spanish IRPF rates on income above the exclusion — which can reach 47% in the upper brackets. For lower-income earners whose total income is below the exclusion amount, this can work well.
  • Beckham Law strategy: Elect Spain's special expatriate regime, pay 24% flat on all Spanish-source work income up to €600,000 per year. Your U.S. return still reflects the income; the Foreign Tax Credit offsets much of the U.S. liability with Spanish taxes paid. For most Digital Nomad Visa holders earning $100,000 or more, Beckham Law wins decisively.

The interaction between the U.S.-Spain tax treaty, the FEIE, and Beckham Law is specific to individual circumstances. Do not choose between them without analysis from a CPA who handles both U.S. expat returns and Spanish tax filings.

Claiming the FEIE

File Form 2555 with your U.S. federal tax return (Form 1040) to claim the exclusion. You can use either the bona fide residence or physical presence test — your preparer will help you determine which applies. If you use the physical presence test, document your travel dates carefully; the 330-day count must be provable from passport stamps, airline records, or other evidence.

Generally no. The FEIE requires that your tax home be in a foreign country and that you meet either the physical presence or bona fide residence test. Under Beckham Law you are a Spanish tax resident, which creates its own tax obligations on Spanish-source income. The two regimes interact poorly and in most cases you must choose: FEIE or Beckham Law. Given the significant financial advantage Beckham Law offers for most high-income American nomads in Spain, it is usually the better choice — but this requires analysis specific to your income level and sources. Consult a CPA who handles both U.S. and Spanish returns.

No. U.S. citizens must file a federal tax return regardless of where they live. The FEIE reduces the taxable income on that return — it does not eliminate the obligation to file. Form 2555 is attached to your 1040 to claim the exclusion.

You must be physically present in a foreign country or countries for at least 330 full days during any 12-month period. Days in the U.S. do not count. This test is mechanical — count the days carefully, because partial days (arrival and departure) generally don't count.