If you’re a US expat in Hong Kong, you can exclude a big chunk of your earnings from your federal tax return. Good news, you can exclude up to $130,000 of your Hong Kong income in 2025 by meeting the FEIE requirements. Once you know the tests, limits, and forms, you’ll file like a pro and save big.

Here’s how to understand eligibility, calculate your caps, file correctly, and fine-tune your strategy.

Understand FEIE requirements

To claim the foreign earned income exclusion you must have a tax home in Hong Kong and satisfy specific tests. Review the eligibility criteria for details.

Define foreign earned income

Foreign earned income is payment for services you perform abroad. This normally covers:

  • Wages, salaries, commissions, bonuses
  • Professional fees and consulting income
  • Certain noncash benefits (lodging or meals provided for your employer’s convenience)
  • Allowances or reimbursements tied to your work

Passive income such as dividends or interest doesn’t qualify.

Compare residence tests

You meet FEIE requirements by passing one of two tests:

  • Bona fide residence test: Live abroad for an uninterrupted period that includes a full tax year, with an intent to stay.
  • Physical presence test: Spend at least 330 full days in any consecutive 12-month window outside the US (trips home don’t count toward those days).

Calculate your exclusion limits

Understanding your caps helps you maximize benefits.

Check maximum exclusion

For tax year 2025, the FEIE cap is $130,000 or your actual foreign earnings, whichever is less. If you’re married and both spouses qualify separately, you could exclude up to $260,000 total. See more on the maximum exclusion.

Understand housing amounts

You may also claim a housing exclusion or deduction for qualifying lodging costs. Generally your allowable housing expense is capped at about 30% of the FEIE cap (roughly $39,000 for 2025), though local high-cost exceptions apply. Keep receipts and lease agreements to back up your claim.

File your FEIE claim

Accurate filing locks in your savings.

Fill out form 2555

Use FEIE Form 2555 to report your foreign earned income and housing amounts. You’ll enter:

  1. Your foreign address and tax home details
  2. Dates of your qualifying period abroad
  3. Income figures and supporting documentation
  4. Housing expenses if you claim that exclusion

Attach Form 2555 to your Form 1040 when you file.

Report remaining income

Any earnings above your excluded amount still go on your 1040. You’ll calculate tax on that balance at normal rates. If you’re self-employed, remember the FEIE doesn’t reduce your self-employment tax liability.

Optimize your tax savings

Small tweaks can boost your overall benefit.

Use self-employment strategies

If you run your own business, net your income before applying the exclusion (that determines the taxable amount). Keep clear expense records, since business deductions reduce your FEIE basis. For tips on structuring your reporting, see FEIE for freelancers.

Avoid common mistakes

  • Overstating days abroad without travel logs
  • Claiming housing costs you didn’t actually pay
  • Missing deadlines if you file late (you get an automatic two-month extension, but interest can still accrue)

A quick double-check prevents IRS notices later.

Wrap up and next steps

  • Understand the tests you must pass
  • Calculate your income and housing caps
  • File Form 2555 accurately
  • Leverage self-employment tips

Pick one step today—gather your records or draft Form 2555—and move toward a lighter tax bill. You’ve got this, and American Pacific Tax is here to guide you.

Frequently asked questions

What counts as housing expenses under FEIE?
Qualifying costs include rent, utilities, property insurance, and furniture rental. You calculate your base housing amount per day (for 2024 it’s $52.60) and then figure your allowable total up to the limit.

Can I use the FEIE and foreign tax credit together?
You can exclude your foreign earned income first, then claim a foreign tax credit on any taxes paid for income that remains taxable. You cannot claim credit on amounts you excluded.

How do I prove I spent 330 days abroad?
Maintain a travel log, passport stamps, boarding passes, or a date-stamped calendar. Consistent records make it easy to verify your physical presence test if the IRS asks.