Form 2555
Updated on July 18, 2025
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Table of Contents
What is Form 2555 used for?
Form 2555 lets US expats claim the Foreign Earned Income Exclusion (FEIE) or the Foreign Housing Exclusion (FHE). IRS Form 2555 allows Americans abroad to exclude up to US$130,000 of their foreign-earned income from US taxation in 2025.
The FEIE and FHE are best for:
- Expats living in countries with low or no income tax (e.g., UAE)
- Remote workers or digital nomads
- Contractors in tax-friendly jurisdictions
What is FEIE?
The Foreign Earned Income Exclusion (FEIE) is a tax break that lets Americans living abroad exclude part of their foreign income from US tax.
If you qualify, you can exclude up to a certain dollar amount of earned income (such as wages or self-employment income) from US taxation.
FEIE Exclusion limits by tax year
The maximum amount you can exclude depends on the tax year (which changes annually for inflation):
|
Tax year |
FEIE amount |
|
2025 2024 2023 2022 |
US$130,000 US$126,500 US$120,000 US$112,000 |
📌 Important: FEIE only covers earned income. It does not apply to sources such as dividends, rental income, pensions, or capital gains.
Who can use Form 2555?
You must have foreign earned income and meet one of two residency tests in order to use Form 2555.
Eligibility Checklist:
- You earn active income (wages or self-employment)
- Your tax home is in a foreign country
- You pass either:
- Physical Presence Test, or
- Bona Fide Residence Test
Physical Presence vs. Bona Fide Residence
See which test best suits your situation:
|
Key Criteria |
Physical Presence Test |
Bona Fide Residence Test |
|
Minimum time abroad |
330 full days in 12 months |
Entire calendar year (Jan 1 – Dec 31) |
|
Where you can live |
You can live in one or many foreign countries |
You must stay in just one country for the full year |
|
Type of stay |
Temporary or flexible stay (short stays or frequent moves) |
Long-term, with no plans to return soon |
|
Travel freedom |
You’ll need to track all travels, even short US visits can disqualify you |
More flexible, as long as you remain a tax resident of the foreign country |
|
Best suited for |
Digital nomads, freelancers, and frequent travelers |
US expats who’ve settled abroad long-term |
|
Focus of the test |
Based on where you physically are |
Based on how committed you are to living abroad |
Need to file IRS Form 2555?
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Step-by-Step: How to File Form 2555
-
Gather documentation
- You’ll need to collect some important documents before filling out the form. These include:
- Proof of foreign income (e.g., pay stubs, tax documents, or business records)
- Employer or self-employment details
- Residency proof (e.g., lease agreements, utility bills, or passport travel stamps)
- You’ll need to collect some important documents before filling out the form. These include:
- Download and complete Form 2555
- You can obtain Form 2555 at the IRS website. You’ll be asked about your foreign residence, foreign income, important dates, and especially, any housing expenses you want to exclude.
- Attach Form 2555 to Your Tax Return (Form 1040)
- Since it’s not a standalone form, Form 2555 must be attached to your US tax return (Form 1040). Make sure everything is accurate and submitted before the tax deadline (or the expat extension date: June 15).
📌 Pro Tip: If you’re not sure how to fill it out correctly, it’s a good idea to ask for professional help, especially if your situation involves multiple countries or self-employment.
Should you avoid Form 2555?
Form 2555 works best for low-tax countries. If you live in a high-tax country, Form 2555 may not be your best option, and avoiding this tax “benefit” might be more advantageous.
Why?
Because Form 2555 only lets you exclude a fixed amount of income (US$130,000 for 2025). Any income above that is still taxed by the US.
But if you’re living in a country like the UK, Australia, Canada, or most of the EU, you’re probably paying more in taxes locally than you would in the US.
In that case, the Foreign Tax Credit lets you offset your US taxes dollar-for-dollar with the taxes you’ve already paid to your host country, which could end up wiping out your US tax bill completely.
📌 Keep in mind: Income excluded using Form 2555 isn’t considered taxable, so it doesn’t count when calculating credits like the Additional Child Tax Credit.
FAQ'S
-
Do I need to renew my exclusion each year?
As of the 2025 tax year, Form 2555 allows US expats to exclude up to US$130,000 of foreign earned income from US taxation under the Foreign Earned Income Exclusion (FEIE).
-
Can I exclude foreign housing expenses?
-
Do I need to renew my exclusion each year?
-
Can I use both Form 2555 and Form 1116?
-
What income qualifies for the Foreign Earned Income Exclusion?
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Is Form 2555-EZ still available?
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What is the deadline for filing Form 2555?
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