Ready to slash your US tax bill while freelancing in Hong Kong? FEIE for freelancers opens a path to exclude $130,000 of your foreign earnings. This covers your 2025 Hong Kong income. You’re about to get the steps you need to win this season.
Set your FEIE goal
Define your target exclusion now. Aim to drop as much Hong Kong income as possible. For tax year 2025 the FEIE cap sits at $130,000. Track progress by noting your projected exclusion in a single spreadsheet.
Set your target exclusion by this Friday to hit your tax relief milestones.
Check eligibility criteria
Verify your eligibility now. Use any one of these conditions to qualify:
- You maintain a foreign tax home in Hong Kong.
- You meet the bona fide residence test.
- You meet the physical presence test.
Bona fide residence test
Establish stable residence abroad. Live continuously in Hong Kong for one full US tax year. Maintain proof of address and social ties.
Physical presence test
Spend at least 330 days abroad. Track your days with a detailed log. Check full rules on our FEIE physical presence test page. Note that this exclusion does not affect your self-employment tax obligation.
Verify your status against FEIE eligibility criteria by this Friday to avoid penalties.
Calculate maximum exclusion
Compute your exclusion limit quickly. Limit equals the lower of your foreign earnings or the annual cap. For 2025 that cap hits $130,000 as noted on our FEIE maximum exclusion page.
Prorate for partial year
Multiply the annual limit by your qualifying days. Divide by 365 to find your pro rata cap.
| qualifying days | pro rata cap (2025) |
|---|---|
| 365 | $130,000 |
| 330 | $117,808 |
| 180 | $64,109 |
Compute your cap in the next 48 hours to lock in your savings.
Evaluate housing option
Consider foreign housing exclusion benefits. You may choose either housing exclusion or housing deduction. Exclusion subtracts your housing costs directly from taxable income. Deduction lowers net self-employment earnings instead. Note that the housing cap generally runs at 30 percent of your FEIE limit. For 2025 thirty percent of your cap equals $39,000.
Learn more on our FEIE housing exclusion page.
Decide on your housing option by month end to maximize savings.
Prepare filing paperwork
Gather your documents for filing.
- Download FEIE form 2555 from IRS.
- Fill sections A, B or C based on your test.
- Add housing details in Part VI if needed.
- Collect proof like lease, utility bills and travel log.
- Attach the form to your Form 1040 when you file.
File with Form 2555 by April 15 to lock in your relief.
Estimate your savings
Run a quick savings model.
- Calculate your taxable income before exclusion.
- Subtract your actual FEIE amount from that total.
- Multiply remaining income by your federal tax rate.
- Budget a 15.3 percent self-employment tax on net earnings.
- Compare your new tax bill to the original number.
Aim for at least a 25 percent federal tax cut by running this model.
Pep talk and next steps
Celebrate your quarter wins so far. You’ve tackled eligibility tests, cap calculations, housing choices and paperwork. You’re now in the final quarter of this tax season. Keep your pace high until you file. Our pros at American Pacific Tax stand ready to guide your finish line sprint.
Schedule your review call by October 31 to lock in personalized support.
Frequently asked questions
Can I claim both FEIE and foreign tax credit?
Yes, you may claim both FEIE and foreign tax credit. The credit applies to income above your exclusion. Combine carefully to avoid overlap penalties.
Does FEIE affect self employment tax?
No, FEIE reduces only your regular income tax. It does not change your self employment tax obligation. Expect to pay fifteen point three percent on net income above four hundred dollars.
How do I prorate FEIE mid year?
Multiply your annual cap by your qualifying days. Divide that result by 365 for your pro rata exclusion.
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