Form 2555, Foreign Earned Income, is the IRS form U.S. citizens and U.S. resident aliens use to claim the Foreign Earned Income Exclusion (FEIE) and the Foreign Housing Exclusion or Deduction. The FEIE lets qualifying expats exclude a substantial portion of their foreign-earned income from U.S. tax - $126,500 for tax year 2024 and $130,000 for 2025, adjusted annually for inflation. The Foreign Housing Exclusion or Deduction lets qualifying taxpayers exclude or deduct certain housing costs above a base amount.
To qualify for the FEIE, you must (1) have foreign-earned income (wages or self-employment income from services performed in a foreign country), (2) have a tax home in a foreign country, and (3) meet either the bona fide residence test (resident of a foreign country for an entire tax year) or the physical presence test (present in foreign countries for at least 330 full days during any 12-month period). U.S. government employees abroad don't qualify because their wages are from the U.S. government - but their non-government foreign earnings can.
The bona fide residence test requires you to be a resident of a foreign country for an uninterrupted period that includes an entire tax year. It's based on intent and facts (housing, family, community ties, indefinite assignment). The physical presence test is purely mechanical: 330 full days in a foreign country during any 12-month period (the 12-month period can straddle tax years). Most expats arriving mid-year use the physical presence test for the first year and then switch to bona fide residence.
Form 2555 is attached to your Form 1040 - due April 15 (or June 15 with the automatic extension granted to taxpayers abroad). Many expats use Form 2350 to request a special extension to give themselves enough time to meet the physical presence test or qualify under bona fide residence. The exclusion is elected by filing Form 2555 - once elected, it remains in effect until revoked. Revoking the FEIE means you can't elect it again for five years without IRS permission. The Foreign Tax Credit (Form 1116) is often used alongside Form 2555 for foreign income exceeding the exclusion.
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