The Foreign Earned Income Exclusion (FEIE) allows U.S. taxpayers who qualify to currently exclude up to $130,000 of foreign earned income from federal taxes. But which countries actually count toward the Physical Presence Test’s 330-day requirement or the Bona Fide Residency Test? The answer is simpler than you might think, because nearly every foreign country counts, with only a handful of exceptions.
Understanding which locations qualify (and which don’t) is critical for tracking your days correctly and avoiding costly mistakes when filing Form 2555. This guide breaks down the rules for foreign countries, special territories, international waters, and edge cases that trip up even experienced expats.
Looking for an easy way to track your FEIE eligibility? Check out Nationly, the travel tracking app built for American expats and digital nomads.
Every Foreign Country Counts (With Rare Exception)
For FEIE purposes, any foreign country means any territory under the sovereignty of a government other than the United States. This includes:
- All independent nations recognized by the U.S.
- Countries without formal U.S. diplomatic relations
- Countries under sanctions or travel restrictions
- Remote or disputed territories under foreign sovereignty
According to IRS Publication 54, the term “foreign country” encompasses the country’s airspace, territorial waters (typically 12 nautical miles from shore), and even the seabed beneath those waters. You don’t need to be on land—time spent in a country’s territorial waters counts toward your 330 days.
What the IRS Actually Excludes
The IRS explicitly excludes only these locations from counting as foreign countries for purposes of FEIE qualification:
- Antarctica: Not under any nation’s sovereignty
- U.S. territories and possessions: Puerto Rico, U.S. Virgin Islands, Guam, American Samoa, Northern Mariana Islands
- International waters: Areas beyond any country’s territorial limits
- U.S. airspace: Flying over U.S. territory or in U.S.-controlled airspace
That’s it. If you’re physically present in a recognized foreign country for a full day (midnight to midnight), it counts toward your Physical Presence Test regardless of political tensions, travel advisories, or diplomatic status.
Important Exception: Cuba has unique FEIE restrictions due to U.S. travel regulations. If you were in Cuba in violation of U.S. travel restrictions, that time cannot count toward the Physical Presence Test, and income earned there doesn’t qualify as foreign earned income.
Combat Zones and Countries Under Sanctions
Some expats may assume combat zones or sanctioned countries don’t count for FEIE. This is incorrect.
Combat Zones Still Count
Time spent in designated combat zones counts toward the 330-day requirement, provided you meet the other FEIE qualifications. However, military personnel serving in combat zones cannot use FEIE for their military pay, although certain civilian contractors may qualify depending on their employment arrangements.
Special provision for combat zones: Citizens or residents serving in areas designated by Presidential Executive Order as combat zones in support of the U.S. Armed Forces can qualify as having a tax home in a foreign country, even if they maintain an abode within the United States. For current IRS-recognized combat zones, visit IRS.gov/Newsroom/Combat-Zones.
Note that the IRS also provides extensions and waivers for individuals who cannot meet the Physical Presence Test due to war, civil unrest, or similar adverse conditions. These waivers don’t disqualify the days you were present, but rather excuse you from the 330-day requirement entirely if you left due to the adverse conditions.
Sanctioned Countries
U.S. economic sanctions don’t disqualify countries from counting toward FEIE. Time spent in Iran, North Korea, Syria, or any other sanctioned nation counts toward your 330 days, as long as you were physically present for complete 24-hour periods.
Cuba is the notable exception: Due to specific U.S. travel restrictions, time spent in Cuba in violation of those restrictions does not count toward FEIE eligibility. The only exception is for services performed at the U.S. Naval Base at Guantanamo Bay, which are not considered violations of travel restrictions.
That said, earning income in sanctioned countries raises separate legal questions beyond FEIE eligibility. Always consult legal counsel regarding sanctions compliance. Tax benefits don’t override other federal laws.
Ships, Aircraft, and International Waters
Movement between countries creates gray areas that confuse many expats trying to track their progress to 330 days.
Territorial Waters vs. International Waters
Territorial waters (within 12 nautical miles of shore): Count as part of that country’s territory. If you’re on a ship or oil rig in territorial waters for a full day, that day counts toward your Physical Presence Test.
International waters (beyond territorial limits): Do not count. Days spent entirely in international waters—whether on a cruise ship, cargo vessel, or offshore platform—do not contribute to the 330-day requirement.
Aircraft and Transit Days
Flying over a foreign country: Does not count unless you land and remain for a full day. Simply crossing foreign airspace in transit doesn’t help you meet the Physical Presence Test.
Layovers and connections: These only count if you remain in the foreign country for the entire 24-hour period from midnight to midnight. A 6-hour layover in Amsterdam does not count, even if you leave the airport.
Travel days between countries: Typically do not count because you’re not present in any single foreign country for a complete day. If you fly from Germany to Thailand, departing at 10 AM Berlin time, neither that day in Germany nor your arrival day in Thailand counts unless you cross midnight while physically in one country’s territory. Similarly, less than 24 hours in the US on a layover between foreign countries does not count as a day in the U.S.
Day-Counting Scenarios
| Scenario | Counts toward 330 days? | Explanation |
| Full day in Tokyo | Yes | Present for entire 24-hour period |
| Flight from U.S. to London (8 hours) | No | In transit; not in foreign country for full day |
| Cruise ship in Caribbean international waters | No | Beyond any country’s territorial limits |
| Ship in Mexican territorial waters (full day) | Yes | Within Mexico’s 12-nautical-mile zone |
| Layover in Dubai (10 hours) | No | Not present for complete midnight-to-midnight period |
| Services at Guantanamo Bay | Yes | Not considered violation of Cuba travel restrictions |
| Time in Cuba (in violation of travel restrictions) | No | Explicitly excluded by IRS due to U.S. travel laws |
U.S. Territories: The Confusing Exception
U.S. territories present a unique situation. Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa, and the Northern Mariana Islands are not foreign countries for FEIE purposes, even though they’re not states.
Days spent in these territories do not count toward your 330 days under the Physical Presence Test. However, residents of these territories may qualify for different tax benefits under local tax codes (most notably Puerto Rico’s Act 60 incentives for new residents).
If you split time between a U.S. territory and foreign countries, track your days carefully. Only the time in actual foreign countries counts toward FEIE eligibility.
Qualifying for FEIE can have big benefits. Find out how much you can save using our FEIE Savings Calculator.
FEIE Country Qualification Checklist
To ensure your days legitimately count:
- Verify sovereignty: Is the location under a foreign government’s control?
- Check travel restrictions: Were you in Cuba or another restricted location legally?
- Check territorial limits: If at sea, are you within 12 nautical miles of a foreign shore?
- Confirm full-day presence: Were you physically there from midnight to midnight?
- Document your location: Keep records proving where you were each day with an app like Nationly.
The vast majority of locations where expats live and work qualify without issue. Focus your attention on transit days, layovers, time at sea, and any travel to Cuba or other restricted locations, as those are the common trouble spots when calculating your 330 days.
Why Accurate Day-Tracking Matters
The IRS places the burden of proof on you to demonstrate you met the Physical Presence Test. If you’re audited, you’ll need to show:
- Entry and exit dates for each country
- Complete daily location records for your 12-month period
- Supporting documentation (passport stamps, boarding passes, hotel receipts)
Missing the 330-day threshold by even one day disqualifies you from claiming FEIE for that tax year. That’s why it’s best to use an automated location tracking app like Nationly to eliminate the risk of manual counting errors and provide audit-ready documentation of your physical presence.
Understanding which countries count is just the first step. The real challenge is maintaining accurate records of your daily locations, especially when moving frequently between countries or dealing with complex itineraries.
Whether you’re a digital nomad, long-term expat, or contractor on temporary assignment, proper day-tracking ensures you maximize your FEIE benefits without audit risk.
FAQ
Do days spent in disputed territories count toward FEIE?
If a disputed territory is under the de facto control of a foreign government, days spent there generally count toward your Physical Presence Test. The IRS typically follows U.S. State Department recognition when determining whether a location qualifies as a foreign country. Keep documentation of your physical presence, as disputed territories may warrant extra scrutiny during audits.
Can I count partial days at the beginning or end of my foreign residence?
No. The Physical Presence Test requires complete 24-hour periods (midnight to midnight) in foreign countries. Your arrival and departure days typically don’t count unless you arrive or depart at exactly midnight. This is why the 330-day requirement out of 365 days allows a 35-day buffer for travel and U.S. visits.
What if I work on a ship that travels through both territorial and international waters?
Only the days spent entirely within foreign territorial waters count toward your 330 days. Days when your vessel is in international waters—even partially—do not count. Maritime workers should maintain detailed ship logs showing daily positions to document which days qualify for FEIE purposes.
What about Cuba? Does time there count for FEIE?
Cuba has special restrictions. If you were in Cuba in violation of U.S. travel restrictions, that time does not count toward the Physical Presence Test, and income earned there doesn’t qualify for FEIE. However, services performed at the U.S. Naval Base at Guantanamo Bay are not considered violations of travel restrictions and do count. See our complete guide to Cuba and FEIE for detailed information.
Do virtual locations or digital presence count?
No. Physical presence means your body must be in the foreign country. Remote work for foreign clients while physically located in the U.S. does not count toward the Physical Presence Test, and that income would not qualify for FEIE regardless of where your employer or clients are located.
