You may be able to. For the 2026 US tax year, a US citizen working in the UAE may be able to exclude up to $132,900 of foreign earned income from US income tax using the Foreign Earned Income Exclusion (FEIE), provided they have a tax home in the UAE and meet either the physical presence test or the bona fide residence test. You generally still need to file a US return to claim it, and it applies only to foreign earned income.

Why US citizens still deal with the IRS from Dubai

The US taxes its citizens on worldwide income wherever they live. The UAE does not currently charge personal income tax on salaries, so there is usually no UAE tax to credit against US tax. The FEIE is therefore often the main way US citizens in the UAE may reduce US income tax on their pay.

Who qualifies

The broad position is that you must meet all of these:

  • Foreign earned income. Pay for services you physically perform in a foreign country. Where the work is done matters, not where you are paid, so salary from a Dubai employer for days worked in the US is not foreign earned income.
  • A tax home abroad. Your main place of work is outside the US. Temporary-presence rules and where your abode is can affect this.
  • One of two tests:
    • Physical presence test: at least 330 full days in a foreign country or countries in any 12 consecutive months.
    • Bona fide residence test: genuine residence in a foreign country for an uninterrupted period that includes a full tax year.

Having a salary in Dubai does not on its own make the income eligible. Many people in their first year abroad rely on the physical presence test, because the bona fide residence test needs a full tax year.

What it covers, and what it does not

The IRS gives the maximum exclusion as $130,000 for 2025 and $132,900 for 2026, per qualifying person. If both spouses work abroad and qualify, each can claim their own exclusion up to their own foreign earned income.

The foreign housing exclusion is separate, with its own base amount and location-based limits.

The FEIE does not cover:

  • pensions, annuities or Social Security
  • investment income such as interest, dividends and capital gains
  • pay received as a US government employee

Three further points often catch people out:

  • Stacking. Income above the exclusion is taxed at the rates that would have applied if the excluded income had not been excluded.
  • Self-employment tax. The IRS states that the exclusion reduces regular income tax but does not reduce self-employment tax.
  • Foreign tax credits. You cannot claim a foreign tax credit on income you have excluded. Once chosen, the exclusion generally continues until revoked, and claiming a foreign tax credit on income you could have excluded can be treated as revoking it.

Illustrative example only, not a real client.

Michael is a US citizen who moved to Dubai in January 2025 and is employed there on a salary of $160,000 a year. Assuming all his work is physically performed in the UAE, his tax home is in the UAE and he is present outside the US for at least 330 full days in a 12 month period covering 2026, he may exclude $132,900, leaving $27,100 potentially subject to US income tax. Because of stacking, that $27,100 is taxed at the rates that apply to income above $132,900. Interest and dividends from his US brokerage account are not covered by the exclusion. If he worked some days in the US, or claimed the housing exclusion, the figures would change.

How to claim

You claim the FEIE on Form 2555 with your US return (Form 1040). If you live outside the US on the regular due date, you get an automatic 2 month extension to 15 June. The extension is for filing, not for paying. Interest may accrue on unpaid tax from the normal April due date.

You may also need to report foreign accounts, for example on an FBAR. Our guide to US citizens abroad and their tax obligations explains the wider picture, and if you hold US shares or RSUs see our guide to US shares, RSUs and estate tax.

Common mistakes

  • Assuming no US return is needed because no tax is due after the exclusion.
  • Miscounting days for the physical presence test, which needs full days.
  • Treating US workdays or investment income as covered.
  • Forgetting separate reporting of foreign accounts and assets.

A regulated financial adviser can help. Get in touch for a free introduction.

Sources and further reading

Last reviewed: October 2026. Tax year: 2026/27 (UK); 2026 (US). Jurisdictions covered: US, UAE. Rates, legislation and guidance change, so recheck before relying on this. Rules can differ between England and Wales, Scotland and Northern Ireland; tax residence is fact-specific; treaty outcomes depend on residence, domicile or nationality provisions; examples are simplified and omit reliefs, costs, exchange rates and anti-avoidance rules. This is general information, not financial, tax or legal advice. Take advice in the relevant country before acting.