IRS Form 673 – If you’re a U.S. citizen working abroad and earning foreign income, navigating U.S. tax obligations can feel overwhelming. One key tool to ease the burden is IRS Form 673, which allows you to claim an exemption from federal income tax withholding on eligible foreign earned income. This form ties directly to the exclusions under Section 911 of the Internal Revenue Code, helping you avoid overpaying taxes upfront and keeping more of your paycheck each month. In this guide, we’ll break down what Form 673 is, who qualifies, how to complete it, and the latest updates for 2026, ensuring you have the information needed to optimize your tax situation as an expat.
What Is IRS Form 673?
IRS Form 673, officially titled “Statement for Claiming Exemption from Withholding on Foreign Earned Income Eligible for the Exclusion(s) Provided by Section 911,” is a document U.S. citizens use to instruct their U.S. employers to stop or reduce withholding federal income taxes on wages earned outside the United States. This exemption applies to the portion of your income that qualifies for the foreign earned income exclusion (FEIE) and, if applicable, the foreign housing exclusion.
The form serves as a certification to your employer that you expect to meet the requirements for these exclusions, allowing them to adjust withholding accordingly. Without it, your employer might withhold taxes as if all your income were U.S.-sourced, leading to a large refund when you file your taxes—money you could have had access to throughout the year.
Key benefits include:
- Reducing cash flow issues by minimizing overwithholding.
- Aligning your paycheck with your actual tax liability under Section 911.
- Simplifying tax planning for expats who qualify for exclusions.
Note that submitting Form 673 doesn’t guarantee the exclusion; it’s based on your good-faith belief that you’ll qualify. You’ll still need to file Form 2555 with your tax return to officially claim the exclusions.
Who Qualifies for Form 673?
To use Form 673, you must be a U.S. citizen (resident aliens are not eligible) and expect to qualify for the foreign earned income exclusion under Section 911. This means meeting one of two tests:
- Bona Fide Residence Test: You’ve been a bona fide resident of a foreign country for an uninterrupted period that includes an entire tax year, and you intend to continue residing there.
- Physical Presence Test: You’ve been physically present in a foreign country for at least 330 full days during any 12-month period.
Your tax home must also be in a foreign country, and you can’t have submitted a statement to foreign authorities denying residency there (or if you did, it was overruled).
For 2026, the maximum foreign earned income exclusion is $132,900 per person, up from $130,000 in 2025. The foreign housing exclusion is limited to generally 30% of the FEIE amount ($39,870 for 2026), minus a base housing amount (typically 16% of the FEIE, or about $21,264 prorated for your qualifying period).
This form is ideal for Americans employed by U.S. companies while living abroad, such as remote workers or those on international assignments. If you’re self-employed or working for a foreign employer, different rules may apply, and Form 673 isn’t used.
How to Complete IRS Form 673: A Step-by-Step Guide?
Filling out Form 673 is straightforward and consists of three parts. Download the latest version from the IRS website: https://www.irs.gov/pub/irs-pdf/f673.pdf. Here’s how to complete it:
Part I: Qualification Information for Foreign Earned Income Exclusion
- Enter your name and Social Security Number.
- Specify the tax year (e.g., calendar year 2026).
- Check the applicable test (Bona Fide Residence or Physical Presence).
- For Bona Fide Residence: Provide the foreign country, start date of residency, and expected end date.
- For Physical Presence: List the foreign country and the 12-month period you’ll meet the 330-day requirement.
Part II: Estimated Housing Cost Amount for Foreign Housing Exclusion (Optional if not claiming housing)
- Estimate your qualified housing expenses:
- Line 1: Rent
- Line 2: Utilities (excluding telephone)
- Line 3: Property insurance
- Line 4: Non-deductible occupancy taxes
- Line 5: Lease fees
- Line 6: Household repairs
- Line 7: Total qualified expenses.
- Line 8: Base housing amount (16% of the FEIE prorated for your qualifying days; for full-year 2026, it’s approximately $21,264).
- Line 9: Subtract Line 8 from Line 7 for your estimated housing cost amount.
Ensure the total housing amount across all employers doesn’t exceed your actual costs.
Part III: Certification
- Sign and date under penalties of perjury, affirming the information’s accuracy and your commitment to notify your employer if you become disqualified.
Submit the completed form directly to your U.S. employer—not the IRS. They may choose not to honor it if they doubt your qualification, but most will if the form is properly filled out.
Benefits of Using Form 673 for Expats
By filing Form 673, you can:
- Improve Cash Flow: Stop overwithholding and access your money immediately rather than waiting for a tax refund.
- Avoid Double Taxation: Coordinate with foreign tax treaties or credits to minimize overall tax liability.
- Simplify Filing: Pair it with Form 2555 on your annual return to claim the full exclusions.
For example, if your 2026 foreign salary is $100,000 and you qualify for the full FEIE, your employer can withhold $0 on that amount, saving you from reclaiming it later.
Recent Updates and Related Resources
As of 2026, there are no major changes to Form 673 itself (last revised August 2019), but exclusion amounts have increased due to inflation. Key updates include:
- FEIE limit: $132,900.
- Housing expense cap: Varies by location but starts at 30% of FEIE.
Consult IRS Publication 54, “Tax Guide for U.S. Citizens and Resident Aliens Abroad,” for detailed examples. If serving in a combat zone, special rules apply—see Form 2555 instructions.
Note: Form 2555-EZ is discontinued after 2018; use Form 2555 instead.
Frequently Asked Questions About IRS Form 673
Can resident aliens use Form 673?
No, it’s only for U.S. citizens.
What if I work for multiple employers?
Provide a separate Form 673 to each, ensuring housing estimates don’t overlap.
Do I need to file Form 673 every year?
Yes, if your situation changes or for each tax year.
What happens if I don’t qualify after submitting?
Notify your employer immediately; they may start withholding retroactively.
Is Form 673 the same as claiming the exclusion on my tax return?
No—it’s for withholding only. Use Form 2555 for your actual return.
Final Thoughts on Optimizing Your Foreign Earned Income Exclusion
IRS Form 673 is a powerful tool for U.S. citizens abroad, helping you align withholding with your expected tax exclusions under Section 911. By understanding eligibility, completing the form accurately, and staying updated on limits like the $132,900 FEIE for 2026, you can maximize your take-home pay and minimize tax surprises. Always consult a tax professional for personalized advice, especially if your situation involves complex international elements. For the official form, visit the IRS website and start reclaiming control over your expat taxes today.