U.S. citizens or residents living or working abroad must adhere to the same U.S. income tax laws that apply to citizens and residents living in the U.S. Foreign earned income, such as wages or salaries paid while living outside the U.S., can be excluded from gross income if the taxpayer meets certain tests. Form 2555 is used to figure the foreign earned income exclusion or housing deduction.
What is Form 2555?
Form 2555 is an IRS tax form used to figure out and apply the foreign earned income and housing exclusion for U.S. citizens or resident aliens living abroad. To qualify, taxpayers must meet certain requirements, such as the tax home test and the physical presence test. Those who cannot meet the minimum requirements can apply for a waiver or simply file their taxes without claiming the exclusion. Form 2555 must be filed with Form 1040 or 1040-SR, and those affected may additionally be restricted from claiming credits or deductions such as the additional child tax credit and the earned income credit. Interest will be charged if the tax is not paid on the regular due date.
IRS Form 2555 – Who Needs to Fill It Out?
IRS FORM 2555 is used by U.S. citizens and resident aliens living abroad or in foreign countries to qualify for an exclusion of foreign earned income from gross income. To qualify, the applicant must meet the tax home test, which is their regular or principal place of business, employment, or post of duty. They must also meet either the bona fide residence or physical presence tests and be subject to the same U.S. income tax laws as citizens living in the U.S. Applicants must file or petition for an extension by the regular due date of the return (April 18, 2023; June 15, 2023 with the automatic 2-month extension) in order to qualify. Special rules apply for service in combat zones and travel to Cuba. For more information, consult IRS Publication 54, 590-A, and 514.
Step-by-Step: Form 2555 Instructions For Filling Out the Document
Instructions for filling out form 1040 or 1040-SR on Form 2555 include checking if you qualify for the foreign earned income exclusion and/or housing exclusion or deduction by meeting the tax home and either the bona fide residence test or physical presence test. Avoid filing if you are an employee of the U.S. Government. Check IRS.gov for lists of combat zones and countries that qualify for the waiver of time requirements. When filing and paying taxes, you can also acquire an automatic 2-month extension outside the U.S. and Puerto Rico. For the foreign earned income exclusion, you must determine specific factors such as your tax home, abode, date of offenses committed in Cuba, and the foreign earned income tax worksheet in the Instructions for Forms.
Below, we present a table that will help you understand how to fill out Form 2555.
|Information Required for Form 2555||Details|
|Eligibility||Check eligibility for foreign earned income exclusion and housing exclusion or deduction|
|Exceptions||Avoid filing if you are a U.S. Government employee|
|Extensions||Automatic 2-month extension outside the U.S. and Puerto Rico|
|Specific Factors||Determine tax home, abode, date of offenses committed in Cuba, and follow foreign earned income tax worksheet|
Do You Need to File Form 2555 Each Year?
Form 2555 can be used to figure foreign earned income exclusions and housing exclusions or deductions from federal income tax. Generally, you will need to file the form each year if you are a U.S. citizen or resident living in a foreign country, subject to the same U.S. income tax laws. To qualify, you must meet the tax home test in the foreign country, as well as either the bona fide residence test or physical presence test. Special extension and/or exemption rules apply if you had to leave the country due to war or civil unrest. Additionally, Form 2555 must be attached to Forms 1040 and 1040-SR when filed, and special rules exist for the additional child tax credit, earned income credit, foreign tax credit/deduction, IRA deduction, and the taxes on income not excluded when filing.
Download the official IRS Form 2555 PDF
On the official IRS website, you will find a link to download Form 2555. However, to make it easier for you, we are providing the link in our article, which comes directly from the official irs.gov website! Click to download: Form 2555