IRS Form 2555 Instructions: How to Claim the Foreign Earned Income Exclusion

Use Form 2555 to claim an eligible foreign earned income exclusion or foreign housing benefit. The FEIE maximum is $132,900 per qualifying person for tax year 2026, subject to eligible income and qualifying days. Calculate any housing exclusion first; combined benefits cannot exceed the applicable foreign earned income. Form 2555 is filed as an attachment to your annual Form 1040. It is not a standalone filing — you cannot submit it separately or electronically through the BSA system like the FBAR. The form collects detailed information about your foreign residence, your employer (or self-employment), the qualifying test you meet, and the calculation of your exclusion amount. An initial FEIE election generally can accompany a timely return, an amendment of a timely return, or a late return filed within one year of the original due date. Later elections have additional conditions: check tax owed after the exclusion and whether the IRS has discovered the missing election. The applicable procedure may require a prescribed statement or a private letter ruling; a generic reasonable-cause statement is not a substitute. An FEIE election remains effective until revoked. Review prior elections before changing to foreign tax credits: crediting taxes on excludable income can revoke an election. Revocation is also made by an attached statement identifying the choice being revoked. Choosing that exclusion again within five tax years requires IRS approval.

Form 2555 is for US citizens and resident aliens who meet the applicable foreign-income, tax-home and residence or presence requirements. US territories are not foreign countries for this purpose. Qualifying income generally comes from personal services performed abroad. Classify wages, business income and noncash compensation separately; pensions and investment income do not qualify merely because received overseas. Your tax home generally follows your main business or employment location, or your regular abode if no principal business location exists. Keeping a US dwelling alone does not determine your abode; family, economic and personal ties matter. The US-abode restriction has a qualifying combat-zone exception. You must also meet a qualifying residence or physical-presence test. US government employee compensation does not qualify for the FEIE, housing exclusion or housing deduction.

The physical presence test generally requires 330 full days in foreign countries within 12 consecutive months that overlap the tax year. A full day runs midnight to midnight. Apply the IRS travel and transit rules, including special treatment for travel between foreign countries. Confirm your foreign tax home separately. The bona fide residence test requires an uninterrupted foreign residence period including an entire tax year. Brief or temporary trips may be compatible with residence if you intend to return without unreasonable delay. Eligibility depends on the facts; an overseas home or long stay alone does not establish bona fide residence. This test is available to US citizens and to US resident aliens who are citizens or nationals of a country with a US income tax treaty in effect. Choose a test you actually satisfy. A physical-presence calculation does not replace the tax-home requirement, and bona fide residence does not permit unlimited US visits. Check citizenship or nationality restrictions before using the residence test. On Form 2555, you select your qualifying test in Part II (Bona Fide Residence) or Part III (Physical Presence). You only need to complete the part that applies to your chosen test. If you qualify under both, choose whichever provides the most favorable result.

These references follow the 2025 Form 2555 available from the IRS on September 24, 2026. Use the form for your return year; do not insert a 2026 limit into the 2025 form. Part I: line 6 records prior filings and revocations; line 7 asks citizenship or nationality; line 8 concerns a separate foreign family residence; line 9 records tax homes. The US-home question is in Part II, line 15d. Part III: line 16 identifies the testing period, line 17 the principal employment country, and line 18 the travel record. Part IV: report eligible income by category on lines 19–23. Line 24 totals it; lines 25–26 adjust for excludable meals and lodging. Part VII: lines 37–40 calculate the applicable maximum; line 42 determines the FEIE. Part VIII adjusts for deductions attributable to excluded income; line 45 transfers the result to Schedule 1, line 8d. Calculate any housing deduction separately in Part IX.

The Foreign Housing Exclusion (for employees) or Foreign Housing Deduction (for the self-employed) allows you to exclude or deduct certain housing expenses that exceed a base amount. This benefit is claimed through Part VI of Form 2555 and is available in addition to the base FEIE. Calculate the housing benefit from eligible expenses after applying the location-specific expense limit and subtracting the base housing amount. The expense limit is not itself the amount you may exclude. Use the relevant tax year, location and qualifying days; employer-provided amounts and foreign earned income also limit the benefit. Eligible housing expenses can include rent, qualifying utilities, insurance, furniture rental, parking and repairs. The IRS excludes telephone charges, domestic labor, property purchases or improvements, mortgage principal and other listed expenses. Check the relevant instructions rather than treating every housing payment as eligible. On the 2025 form, line 30 limits expenses, line 32 calculates the base and line 33 subtracts it. Line 36 calculates the housing exclusion; Part IX calculates the housing deduction. The foreign housing deduction may reduce regular income tax for qualifying self-employed individuals, subject to the housing and income limits. It does not reduce self-employment tax.

Use travel records to compare permissible 12-month periods, which may overlap. Choose a qualifying period that supports the exclusion for the return year rather than assuming the calendar year is mandatory. For a partial qualifying year, adjust the annual maximum using qualifying days in that tax year. Establish the applicable tax-home and residence or presence period; the move date alone does not determine the calculation. Classify income before calculating the exclusion. Do not treat total income as foreign earned income. The eligible amount, housing exclusion and deductions attributable to excluded income can affect the Form 2555 result. Check the tax-home and abode rules separately from travel days. A US dwelling does not automatically disqualify you; assess your work location and personal ties. Use the correct tax-year form: Form 2555-EZ is not available for 2019 or later years. The IRS required Form 2555 beginning with tax year 2019. Before filing a late initial election, check the IRS timing rules and any required statement or ruling. Missing the original deadline does not automatically eliminate the election.

Compare the available exclusion and credit treatments before electing or revoking FEIE. After revocation, claiming the same exclusion within five tax years requires IRS approval; the original election is not itself an unconditional five-year lockout. A foreign tax bill does not automatically eliminate US tax. Check which taxes qualify for the credit and exclude taxes attributable to excluded income. Treaty limits and any foreign refund entitlement can reduce the amount eligible for credit. For IRA purposes, excluded foreign earnings and housing costs generally do not count as compensation. Check remaining eligible compensation, any applicable spousal IRA rule, annual contribution limits and income restrictions. Choosing the FTC does not by itself establish full IRA eligibility. Choosing foreign tax credits instead of FEIE does not automatically make income eligible for the Section 199A deduction. QBI excludes income that is not effectively connected with a business conducted within the United States; employee wages and other listed categories are also excluded. Assess the business and income separately. When claiming an exclusion or housing deduction, calculate tax on remaining income using the IRS Foreign Earned Income Tax Worksheet. The applicable rates are determined as though those benefits had not been claimed; do not simply apply the lowest brackets to the remaining income. Compare the actual returns under eligible FEIE and FTC treatments, including existing elections and credit restrictions. A country’s headline tax rate alone does not establish which treatment is better.

Form 2555 replaced Form 2555-EZ beginning with tax year 2019. Use the Form 2555 and instructions for the tax year you are filing, including a late or amended 2019 return. Do not use the discontinued EZ form for 2019 or later years.

For a US taxpayer living in Canada, compare eligible FEIE and foreign tax credit treatment using the actual income and tax records. A higher Canadian tax rate does not itself establish a zero US balance: the credit is subject to qualifying-tax rules and a US credit limit. Taxes attributable to income excluded under FEIE cannot also generate a foreign tax credit. Assess income sourcing, treaty rules and any credit carryover before choosing the treatment; a headline rate or salary threshold does not settle the comparison. Review retirement contributions separately. Excluded foreign earnings generally do not count as IRA compensation, but remaining eligible compensation and spousal IRA rules may matter. Contribution eligibility and deductibility have separate limits. Do not infer the US treatment of an RRSP contribution from its Canadian deduction. Gather both countries’ returns, foreign tax assessments, income and residence records, prior FEIE elections and retirement contribution statements for the comparison.