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The text summarizes U.S. foreign-earned income reporting and the foreign tax credit for tax year 2016, using Internal Revenue Service forms including Form 2555, Form 2555-EZ, Form 1116, and Form 1040. It reports real-term decreases in total foreign-earned income and related exclusions, contrasts foreign-source gross income growth with credit growth, and highlights how taxpayer location by continent and country—especially Asia and Europe—drives observed changes.

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Foreign-earned income and foreign tax credit (2016)

Real-term changes from 2011

Taxpayer exclusions and housing exclusion

Geographic distribution by continent and country

Statutory basis and eligibility tests for exclusion

Earned income definitions

by Scott Hollenbeck and Maureen Keenan Kahr or 2016, the total amount of foreign-earned income reported by U.S. taxpayers decreased in real terms by 11.2 percent from 2011 levels of $57.9 billion, to just over $51.4 billion. In contrast, foreign-source gross income reported [by U.S. tax](by U.S. tax)payers increased in real terms by 19.5 percent to $216.7 billion for the year, while the total foreign tax credit claimed grew 14.5 percent to just under $20.1 billion. Unless otherwise stated, the statistics reported in this article are based on data compiled from Form 2555, Foreign Earned Income, Form 2555-EZ, Foreign Earned Income Exclusion, Form 1116, Foreign Tax Credit, and Form 1040, U.S. Individual Income Tax Return. U.S. taxpay- report foreign-earned income and claim the foreign tax credit. For 2016, over 480,000 U.S. taxpayers living abroad reported just over $51.4 billion in foreign-earned income, a decrease of 11.2 percent in real terms from 2011 (the last time this study was done) . U. S. taxpayers claimed $29.6 billion as a foreign-earned income exclusion on their tax returns for the year. Between 2011 income exclusion decreased 2.3 percent, while the housing exclusion decreased 20.3 percent, falling from just under $1.7 billion to a little over $1.3 billion for 2016 (Figure A) . Nearly 69 percent of all taxpayers reporting foreign-earned income had no U.S. income tax liability for 2016. Asian-based U.S. taxpayers continued to report the largest amount of total foreign-earned income ($22 .9 billion) from any continent for 2016, even after a 13.8-percent decrease in real dollars from the $26.6 billion reported for 2011. For 2016, these returns represent approximately 45 percent of all the foreignearned income reported by U.S. taxpayers, which was roughly the same percentage for 2011 (46 percent) but higher than the 40 percent for 2006.1 Much of this negative growth is attributable 1 See Hollenbeck, Scott, and Maureen Keenan Kahr.“Individual Foreign-Earned Income and Foreign Tax Credit, 2006,” Statistics of Income Bulletin, Spring 2009, Volume 28, Number 4. [www . irs . gov/tax stats](www . irs . gov/tax stats) to returns with tax homes of Afghanistan, Iraq, and Japan reporting a combined amount of just under $3.2 billion in total foreign-earned income for 2016, after reporting nearly $7.6 billion for 2011. Taxpayers based in China had a real decrease of 4.5 percent in total foreign-earned income reported. However, they were the second largest source of total foreign earned income for 2016, at just over $3.3 billion. European-based U.S. taxpayers reported the second largest amount of foreign-earned income of just over $13.4 billion, which was a real decrease of 12.3 percent from 2011. As in previous years, the United Kingdom continued to lead all countries from all continents with over $4.8 billion in foreign-earned income, accounting for more than a third of all income from European-based returns. However, this was a 16.5-percent decrease from $5.8 billion in 2011, contributing about half of the overall decrease from European-based returns. Total foreign-earned income reported for North Americanbased taxpayers fell 21.7 percent in real terms for 2016. Canadian-based taxpayers contributed largely to this decline in reported income, reporting just under $3.1 billion in foreignearned income for the year, a 25.0-percent decrease from 2011. income reported on Form 1116, Foreign Tax Credit, grew 19.5 percent, and real foreign tax credits claimed rose 14.5 percent. U. S. taxpayers claimed a total of nearly $20.1 billion in foreign tax credits from approximately 7.8 million returns for 2016; these credits were based on a reported $216.7 billion in foreignsource gross income and $27.0 billion in foreign taxes paid or accrued. As with foreign-earned income by country, the United Kingdom continued to lead in terms of foreign-source gross income reported on Form 1116. For 2016, taxpayers reported $16.7 b

FAQs

What major changes occurred in foreign-earned income from 2011 to 2016?

Total foreign-earned income reported by U.S. taxpayers decreased in real terms by 11.2 percent from 2011 levels to just over $51.4 billion for 2016.

How did foreign-source gross income and the foreign tax credit change for 2016?

Foreign-source gross income increased in real terms by 19.5 percent to $216.7 billion for 2016, while the total foreign tax credit claimed grew 14.5 percent to just under $20.1 billion.

How does eligibility for the foreign-earned income exclusion work at a high level?

Eligibility relies on having an established foreign residence for an uninterrupted period covering the tax year and meeting tests such as the physical presence test requiring at least 330 full days in a foreign country within any 12 consecutive months.

Sep 19, 2026

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