Purpose of Form
If you qualify, you can use Form 2555 to figure your foreign earned income exclusion and your housing exclusion or deduction. You cannot exclude or deduct more than your foreign earned income for the year. You may be able to use Form 2555-EZ, Foreign Earned Income Exclusion, if you did not have any self-employment income for the year, your total foreign earned income did not exceed $99,200, you do not have any business or moving
expenses, and you do not claim the housing exclusion or deduction. For more details, see Form 2555-EZ and its separate instructions.
General Information
If you are a U.S. citizen or a U.S. resident alien living in a foreign country, you are subject to the same U.S. income tax laws that apply to citizens and resident aliens living in the United States. Note. Specific rules apply to determine if you are a resident or nonresident alien of the United States. See Pub. 519, U.S. Tax Guide for Aliens, for details.
Foreign country.
A foreign country is any territory under the sovereignty of a government other than that of the United States. The term “foreign country” includes the
country's territorial waters and airspace, but not international waters and the airspace above them. It also includes the seabed and subsoil of those submarine areas adjacent to the country's territorial waters over which it has exclusive rights under international law to explore and exploit the natural resources. The term “foreign country” does not include U.S. possessions or territories. It does not include the Antarctic region.
Who Qualifies
You qualify for the tax benefits available to taxpayers who have foreign earned income if both of the following apply. You meet the tax home test (discussed
later on this page). You meet either the bona fide residence test or the physical presence test, discussed later. Note. Income from working abroad as an
employee of the U.S. Government does not qualify for either of the exclusions or the housing deduction. Do not file Form 2555.
Tax home test.
To meet this test, your tax home must be in a foreign country, or countries (see Foreign country, earlier), throughout your period of bona fide residence or physical presence, whichever applies. For this purpose, your period of physical presence is the 330 full days during which you were present in a
foreign country, not the 12 consecutive months during which those days occurred. Your tax home is your regular or principal place of business, mployment,
or post of duty, regardless of where you maintain your family residence. If you do not have a regular or principal place of business because of the nature of your trade or business, your tax home is your regular place of abode (the place where you regularly live). You are not considered to have a tax
home in a foreign country for any period during which your abode is in the United States. However, if you are temporarily present in the United States, or you maintain a dwelling in the United States (whether or not that dwelling is used by your spouse and dependents), it does not necessarily mean that your abode is in the United States during that time.
Example. You are employed on an offshore oil rig in the territorial waters of a foreign country and work a 28-day on/28-day off schedule. You return to your family residence in the United States during your off periods. You are considered to have an abode in the United States and do not meet the tax home test. You cannot claim either of the exclusions or the housing deduction.