Maximum and Prorated Exclusion Amounts

Foreign Earned Income Exclusion

Maximum Exclusion

The amount of foreign wages and salary you can exclude per year is limited to your actual foreign wages or $80,000, whichever is less. You may claim a prorated exclusion if you did not meet the time requirements for a maximum exclusion.

The maximum annual exclusion will continue to be $80,000 until 2008, when the amount will begin to be adjusted annually for inflation.

Prorated Exclusion

If you do not meet the all the time requirements, you may claim a partial exclusion of income. You would pro-rate the exclusion based on the amount of time actually spent abroad. The pro-rated exclusion is worth a maximum of $242.42 per full day spent in a foreign country. Your pro-rated exclusion amount may not exceed the maximum allowable exclusion.