For tax year 2011 (the most recent data available), an estimated 445,000 tax returns claimed the foreign earned income exclusion (FEIE), which is 0.3 percent of all individual tax returns filed. Taxpayers were able to exclude from taxable income about $30 billion in foreign earned income and housing costs, with about 45 percent excluding all or most of their foreign earned income. The FEIE reduces the tax liability of U.S. taxpayers working abroad even if they paid no foreign income taxes to another country. U.S. taxpayers in higher tax countries can eliminate their U.S. tax liability using the foreign tax credit, which is intended to prevent double taxation when foreign income is taxed by both the United States and a foreign country. This book describes the number and types of taxpayers using the tax expenditure, and analyzes how the tax expenditure may interact with other provisions of the tax code, such as the foreign tax credit; describes what is known about how the tax expenditure may affect business decisions about the employment of U.S. workers abroad, and U.S. exports; and evaluates the potential advantages and disadvantages of modifying or removing the tax expenditure.