Form 2555: Foreign Earned Income, Exclusion, and Housing, Basic Guide

Form 2555 is used by eligible U.S. taxpayers to claim the foreign earned income exclusion and certain foreign housing benefits.

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Introduction

Form 2555 is a federal tax form used by certain U.S. citizens and resident aliens who earned income while living or working outside the United States. The form is generally used to determine whether a taxpayer qualifies for the foreign earned income exclusion and, when applicable, the foreign housing exclusion or deduction.

Understanding the requirements before completing Form 2555 can help taxpayers report foreign income correctly and determine which benefits may apply to their situation.

What Is Form 2555?

Form 2555 is the form used to calculate and claim the foreign earned income exclusion and certain foreign housing benefits. The foreign earned income exclusion may allow an eligible taxpayer to exclude a portion of qualifying foreign earned income from U.S. federal income tax.

Form 2555 generally considers information such as:

Where the taxpayer lived or worked
The period spent outside the United States
Foreign earned income
Employment or self-employment information
Foreign housing expenses, when applicable
The taxpayer’s qualification under the applicable eligibility test

Who Uses Form 2555?

Form 2555 may be used by eligible U.S. citizens and resident aliens who have qualifying foreign earned income. A taxpayer generally needs to meet specific requirements to claim the foreign earned income exclusion. Eligibility may depend on the taxpayer’s foreign residence, physical presence outside the United States, or other applicable requirements.

Form 2555 may be relevant to people such as:

U.S. citizens working outside the United States
U.S. residents earning income from work performed abroad
Employees working in foreign countries
Self-employed individuals working outside the United States
Certain taxpayers who have qualifying foreign housing expenses

Not all income earned outside the United States qualifies as foreign earned income. Taxpayers should review their individual circumstances before claiming an exclusion.

What Information Is Needed?

The information needed to complete Form 2555 generally includes basic personal, employment, residence, and income information. You may need information about your foreign residence, the country or countries where you lived or worked, dates spent outside the United States, employment, foreign earned income, and qualifying housing expenses when applicable.

You may need:

Your name and taxpayer identification information
Your tax return information
Your foreign address
The country or countries where you lived or worked
Dates you were physically present outside the United States
Dates related to your foreign residence
Your employer’s information, when applicable
Foreign wages, salary, or other earned income
Self-employment information, when applicable
Foreign housing expenses, when applicable
Information needed to determine your eligibility for the applicable exclusion

Keep records supporting the information reported on the form.

How to Fill Out/Complete Form 2555

Form 2555 contains several parts that collect information used to determine eligibility and calculate the foreign earned income exclusion and applicable housing benefits. Not every part will apply in the same way to every taxpayer.

Complete the applicable sections using information for the tax year being reported. The form generally requires taxpayers to complete either the bona fide residence section or the physical presence section, depending on how they qualify.

Section 1

Section 1 generally provides basic information about the taxpayer, foreign address, occupation, employer, citizenship or nationality, previous Form 2555 filings, and tax home.

Enter the requested information accurately and make sure it is consistent with the information reported on your federal tax return and supporting records.

Section 2

Section 2 generally applies to taxpayers qualifying under the bona fide residence test. This section provides information about the taxpayer’s foreign residence and the period during which the taxpayer maintained that residence.

Provide the requested residence information and dates when using the bona fide residence test. The qualification rules depend on the taxpayer’s individual circumstances.

Section 3

Section 3 generally applies to taxpayers qualifying under the physical presence test. This section includes information about the taxpayer’s qualifying period and time spent in foreign countries.

Provide the applicable dates for the qualifying period and the requested travel information. Keep records of international travel dates to support the information reported.

Section 4

Section 4 generally addresses foreign earned income. This section is used to report qualifying income earned from services performed outside the United States.

Income may include wages, salaries, professional income, or certain self-employment income, depending on the taxpayer’s circumstances. Report the applicable amounts using the information from your tax records.

Section 5

Section 5 generally addresses the calculation of the foreign earned income exclusion. The calculation is based on qualifying foreign earned income and the applicable period for which the taxpayer meets the requirements.

Complete the applicable calculation using the information reported elsewhere on Form 2555 and the taxpayer’s supporting records. The amount that may be excluded is subject to applicable rules and limitations.

Section 6

Section 6 generally addresses the foreign housing exclusion and foreign housing deduction. Taxpayers who qualify for these benefits may need to provide information about qualifying foreign housing expenses.

Housing expenses can include certain costs associated with maintaining a foreign household. Only expenses that meet the applicable requirements should be included.

Section 7

Section 7 generally addresses the foreign earned income exclusion calculation. Taxpayers claiming the exclusion use this section to determine the applicable amount based on their qualifying foreign earned income and other information reported on the form.

Complete the applicable lines using the information from the preceding sections. Review the calculation to make sure the amounts are supported by your records.

Section 8

Section 8 generally addresses taxpayers claiming the foreign housing exclusion, foreign earned income exclusion, or both. This section helps determine the applicable exclusion amounts and related calculations.

Enter the applicable information and review the calculations before transferring any amounts to the federal income tax return.

Section 9

Section 9 generally addresses taxpayers claiming the foreign housing deduction. This section may also involve information related to an applicable housing deduction or carryover.

Complete this section only when it applies to your situation. Maintain records supporting the housing expenses and calculations reported.

Final Review

Review Form 2555 after completing all applicable sections. Check the taxpayer information, foreign address, employer information, tax home information, foreign residence information, physical presence information, travel dates, foreign earned income, housing expenses, exclusion calculations, deduction calculations, supporting records, and final information reported.

A final review can help identify reporting errors before the form is submitted. Taxpayers should retain Form 2555, income records, employment records, travel records, foreign residence records, housing expense records, tax returns, and supporting tax documents with their tax records.

Common Mistakes

Common Form 2555 mistakes can result from incorrect dates, incomplete information, or misunderstanding which income and expenses qualify. Carefully reviewing the form can help reduce errors involving foreign income, travel dates, residence information, and housing expenses.

Some common issues include:

Reporting income that does not qualify as foreign earned income
Entering incorrect travel or residence dates
Confusing foreign earned income with other types of foreign income
Claiming an exclusion without meeting the applicable requirements
Incorrectly calculating the foreign housing benefit
Leaving required sections incomplete
Using inconsistent information between Form 2555 and the tax return
Failing to keep supporting records
Claiming the same income for an exclusion and another tax benefit when the rules do not allow it

Review the entire form before filing and make sure the information agrees with your tax records.

Related IRS Forms

Form 2555 may be used alongside other federal tax forms depending on the taxpayer’s situation. The additional forms and schedules needed will depend on the taxpayer’s income, deductions, credits, business activities, foreign income, and other circumstances.

Commonly related forms may include:

Form 1040, U.S. Individual Income Tax Return
Form 1116, Foreign Tax Credit
Schedule C, Profit or Loss From Business
Form 8949, Sales and Other Dispositions of Capital Assets
Other schedules and forms that may apply to foreign income or an individual’s tax situation

The forms needed will depend on the taxpayer’s individual tax circumstances.

Where to File or Submit

Form 2555 is generally submitted as part of the taxpayer’s federal income tax filing when applicable. The appropriate filing method and submission requirements can depend on how the taxpayer files the federal return.

Before submitting the form, review the completed Form 2555 and the rest of the tax return for accuracy and completeness.

Current IRS Form & Instructions

Use the Form 2555 and instructions that apply to the tax year being filed. Tax forms and instructions can change, so taxpayers should make sure they are working with the appropriate version for their return.

The general information on this page is intended to remain useful across multiple tax years, while specific form versions, instructions, limits, eligibility requirements, and calculations should always be reviewed for the applicable tax year.

Important Information / Disclaimer

This Form 2555 guide is provided for general informational purposes only and is not tax, legal, or accounting advice. Tax rules, eligibility requirements, filing requirements, limitations, and calculations may change, and individual circumstances can affect whether a taxpayer qualifies for the foreign earned income exclusion or foreign housing benefits.

Taxpayers should review the applicable tax-year requirements and consider consulting a qualified tax professional when their situation is complex. This page is intended as a general educational guide and should not be used as a substitute for reviewing the applicable tax forms, instructions, and tax rules.