Updated October 16, 2026. Quick answer: Form 2555 is titled “Foreign Earned Income”. “If you qualify, you can use Form 2555 to figure your foreign earned income exclusion and your housing exclusion or deduction.” “For 2025, the maximum exclusion amount has increased to $130,000.” “Attach Form 2555 to Form 1040 or 1040-SR when filed.” The decision that matters first is which residence test you will rely on, because the form says to complete one of them.
More IRS forms and schedules, read line by line: Form 1040-NR nonresident return and Form 2350 extension for filers abroad.
IRS worksheets from the 2025 Form 1040 instructions, read line by line: Foreign Earned Income Tax Worksheet.
Foreign tax credit (Form 1116) and alternative minimum tax (Form 6251) for 2025, read line by line: Form 1116 category boxes, Form 1116 line 1a and Form 1116 lines 2 to 5.
Schedule 1 (Form 1040) for 2025, read line by line: Schedule 1 lines 8d to 8f, Schedule 1 line 17 and Schedule 1 line 24.
More IRS forms and schedules, read line by line: Form W-7 instructions.
Who qualifies
“You may qualify for the foreign earned income exclusion and the housing exclusion or deduction if both of the following apply.”
First, the tax home test: “Your tax home is your regular or principal place of business, employment, or post of duty, regardless of where you maintain your family residence.” You aren’t considered to have a tax home in a foreign country for any period during which your abode is in the United States, unless you are serving in support of the U.S. Armed Forces in an area designated as a combat zone. “Otherwise, if your abode is in the United States, you will not meet the tax home test and cannot claim the foreign earned income exclusion.”
Second, either the bona fide residence test or the physical presence test. The form is limited to certain filers: “For Use by U.S. Citizens and Resident Aliens Only”.
A foreign country has a defined meaning: “A foreign country is any territory under the sovereignty of a government other than that of the United States.”
Some pay never qualifies: “Income from working abroad as an employee of the U.S. Government does not qualify for either of the exclusions or the housing deduction.”
Only earned pay is covered. Readers who hold investments abroad can see how the exclusion treats dividends and interest at the investment income and exclusion page.
Key numbers at a glance
The exclusion amount, the day count and the housing limit are collected here.
| Item | As printed |
|---|---|
| Maximum exclusion | “For 2025, the maximum exclusion amount has increased to $130,000.” |
| Physical presence | “at least 330 full days during any period of 12 months in a row” |
| Housing limit | “In 2025, for most locations, this limit is $39,000 (30% of $130,000)” |
Bona fide residence test
“A U.S. citizen who is a bona fide resident of a foreign country, or countries, for an uninterrupted period that includes an entire tax year” qualifies. Resident aliens can use it only in a treaty case: “Only U.S. citizens and resident aliens who are citizens or nationals of U.S. treaty countries can use this test.”
Residence turns on intent: “Whether you are a bona fide resident of a foreign country depends on your intention about the length and nature of your stay.” “If these conflict, your acts carry more weight than your words.”
Short stays do not qualify: “Generally, if you go to a foreign country for a definite, temporary purpose and return to the United States after you accomplish it, you aren’t a bona fide resident of the foreign country.”
Tax filings in the host country matter: “If you submitted a statement of nonresidence to the authorities of a foreign country in which you earned income and the authorities hold that you aren’t subject to their income tax laws by reason of nonresidency in the foreign country, you aren’t considered a bona fide resident of that country.”
Physical presence test
“you must be a U.S. citizen or resident alien who is physically present in a foreign country, or countries, for at least 330 full days during any period of 12 months in a row.” “A full day means the 24-hour period that starts at midnight.”
Trips do not break the count: “The 330 full days can be interrupted by periods when you are traveling over international waters or are otherwise not in a foreign country.”
The measuring window is fixed on line 16: “The 12-month period on which the physical presence test is based must include 365 days (366 days during a leap year), part of which must be in 2025.”
Only one test goes on the form: “You must complete either Part II or Part III of Form 2555, but not both parts.”
A war or unrest exception exists for a person who was a bona fide resident of, or physically present in, a foreign country and had to leave because of war, civil unrest, or similar adverse conditions: “the minimum time requirements specified under the bona fide residence and physical presence tests may be waived.” The person must be able to show they could have reasonably expected to meet the minimum time requirements, and the waiver covers only the countries and dates on the list the IRS publishes each year in the Internal Revenue Bulletin.
What counts as foreign earned income
“Foreign earned income for this purpose means wages, salaries, professional fees, and other compensation received for personal services you performed in a foreign country during the period for which you meet the tax home test and either the bona fide residence test or the physical presence test.”
“Foreign earned income also doesn’t include the following types of income.”
| Not foreign earned income | As printed in the instructions |
|---|---|
| Pensions | “Pension and annuity income (including social security benefits and railroad retirement benefits treated as social security).” |
| Investment income | “Interest, ordinary dividends, capital gains, alimony, etc.” |
| Government pay | “Amounts paid to you by the U.S. Government or any of its agencies if you were an employee of the U.S. Government or any of its agencies.” |
Timing follows cash receipts: “If you are a cash basis taxpayer, include in income on Form 1040 or 1040-SR the foreign earned income you received during the tax year regardless of when you earned it.”
Filers with an unincorporated business in which both personal services and capital are material income-producing factors face a cap: “The amount treated as earned income, however, can’t be more than 30% of your share of the net profits from the trade or business after subtracting the deduction for the employer-equivalent portion of self-employment tax.”
Employer-provided meals and lodging have a test of their own: “To be excludable, the meals and lodging must have been provided for your employer’s convenience and on your employer’s business premises.” For lodging, “you must have been required to accept the lodging as a condition of your employment.”
The exclusion amount, housing and the cost of claiming
Part VII turns the maximum into the exclusion:
| Line | Part VII, as printed on the form |
|---|---|
| 37 | “Maximum foreign earned income exclusion. Enter $130,000” |
| 40 | “Multiply line 37 by line 39” |
| 41 | “Subtract line 36 from line 27” |
| 42 | “Foreign earned income exclusion. Enter the smaller of line 40 or line 41.” |
Line 39 prorates a partial year: “divide line 38 by the number of days in your 2025 tax year and enter the result as a decimal (rounded to at least three places)”. As a computed illustration, not an IRS example, assume 183 qualifying days out of 365. The ratio rounds to 0.501, the computed amount for line 40 is $130,000 times 0.501 which is $65,130 and if line 41 is $90,000 then line 42 is the smaller of $65,130 and $90,000 so it is $65,130.
The form cannot exceed income: “You cannot exclude or deduct more than the amount of your foreign earned income for the year.”
Housing has its own limit: “In 2025, for most locations, this limit is $39,000 (30% of $130,000) if your qualifying period includes all of 2025 (or $106.85 per day if the number of days in your qualifying period that fall within your 2025 tax year is less than 365).”
Line 32 subtracts a base amount: “Multiply $56.99 by the number of days on line 31. If 365 is entered on line 31, enter $20,800 here”. As a computed illustration, not an IRS example, with a full-year qualifying period, qualified housing expenses of $45,000 and the $39,000 limit, line 30 is $39,000 and line 33 is $39,000 minus $20,800 so the computed amount is $18,200.
Housing items: “Housing expenses include rent, utilities (other than telephone charges), real and personal property insurance, nonrefundable fees paid to obtain a lease, rental of furniture and accessories, residential parking, and household repairs.” The line 36 result is the “Housing exclusion. Multiply line 33 by line 35.”
Claiming the exclusion has consequences elsewhere on the return:
| Cost of claiming | As printed in the instructions |
|---|---|
| Earned income credit | “You can’t take the earned income credit if you claim either of the exclusions or the housing deduction.” |
| Additional child tax credit | “You can’t take the additional child tax credit if you claim either of the exclusions or the housing deduction.” |
| Foreign taxes | “If only part of your income is excluded, you can’t claim a credit or deduction for the foreign taxes allocable to the excluded income.” |
The remaining income is taxed at ordinary rates: “you must figure the tax on your nonexcluded income using the tax rates that would have applied had you not claimed the exclusions.” Related pages: the retiring abroad checklist.
Filing: attaching to Form 1040, extensions and revoking
“Attach Form 2555 to Form 1040 or 1040-SR when filed.” “Mail your Form 1040 or 1040-SR to one of the special addresses designated for those filing Form 2555.”
The result flows to the return: “Subtract line 44 from line 43. Enter the result here and on Schedule 1 (Form 1040), line 8d.”
“A 2025 calendar year Form 1040 or 1040-SR is generally due April 15, 2026.” “you are automatically granted a 2-month extension of time to file (to June 15, 2026, for a 2025 calendar year return) if, on the due date of your return, you live outside the United States and Puerto Rico and your tax home (defined earlier) is outside the United States and Puerto Rico.”
“If using this extension, you must attach a statement to your return explaining that you meet these two conditions.” Payment is not extended: “you will owe interest on any tax not paid by the regular due date of your return.”
First-year filers who have not yet passed a test can “File your return timely without claiming the exclusion and then file an amended return after you qualify.”
The choice lasts: “Once you choose to claim the exclusion(s), that choice remains in effect for that year and all future years unless it is revoked.” “If you revoke your choice, you can’t claim the exclusion(s) for your next 5 tax years without the approval of the IRS.”
Which revision applies
The edition read for this page is Form 2555 (2025) and the Instructions for Form 2555 (2025), which are the revisions irs.gov served when they were read on 2026-10-16. Check the tax year printed on the form you are filing, because the exclusion amount, the housing limits and the line numbers can change from one year to the next.
Common mistakes
- Treating a US dwelling as harmless for the tax home test. The instructions say that if your abode is in the United States you will not meet the tax home test and cannot claim the foreign earned income exclusion, except for service in support of the U.S. Armed Forces in a designated combat zone.
- Expecting the exclusion to cover dividends and interest. The instructions list interest, ordinary dividends and capital gains among the types of income that are not foreign earned income.
- Claiming the exclusion and the earned income credit together. The instructions say you cannot take the earned income credit if you claim either of the exclusions or the housing deduction.
Related: earned income exclusion and investment income, retiring abroad checklist, Form 1116 foreign tax credit, FBAR versus Form 8938, and state taxes when you retire abroad.
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Answer againSources
- Form 2555 (2025), Foreign Earned Income: https://www.irs.gov/pub/irs-pdf/f2555.pdf
- Instructions for Form 2555 (2025): https://www.irs.gov/pub/irs-pdf/i2555.pdf
Read from the IRS documents linked above on October 16, 2026. General information, not tax advice. Your own facts decide the outcome, and a preparer, the account provider or the IRS is the right place to confirm anything consequential.