Form 2555: Foreign Earned Income Exclusion (FEIE)

Who Files Form 2555

US citizens and resident aliens with a tax home outside the US who meet either the Bona Fide Residence Test (a tax year of foreign residency) or the Physical Presence Test (330 full days outside the US in any 12-month period).

What Form 2555 Reports

Form 2555 excludes up to $130,000 (2025 inflation-adjusted) of foreign earned income per qualifying taxpayer. The form also computes a Foreign Housing Exclusion for excess housing costs above a base. The FEIE excludes income tax only: self-employment tax (15.3%) is not excluded. Form 2555 is filed with Form 1040.

Key Deadlines

• Filed with Form 1040 by April 15
• Form 2350 grants additional time to satisfy the Physical Presence Test if needed

Common Mistakes

• Choosing FEIE when the Foreign Tax Credit (Form 1116) would have produced lower lifetime tax
• Missing the tax-home requirement (must be in the foreign country, not just physically present)
• Failing to track the 330-day Physical Presence Test correctly across travel days
• Revoking and re-electing the FEIE: once revoked, you generally cannot re-elect for 5 years

Best Practices

• Compare Form 2555 (FEIE) versus Form 1116 (FTC) every year. In high-tax countries the FTC produces equal or better tax outcomes and creates carryforwards; in low-tax countries the FEIE is usually better.
• Track every day inside and outside the US precisely. The Physical Presence Test requires 330 full days outside the US in any 12-month rolling period.
• Do not mix the FEIE with the Foreign Housing Exclusion incorrectly. The housing exclusion has a separate base and ceiling and applies on top of the FEIE.
• Once you revoke the FEIE election, you generally cannot re-elect for 5 years without IRS consent. Make the choice deliberately.
• Coordinate the FEIE timing with state tax residency rules. California, New York, and a few others do not honor the FEIE.

Source: Official Form 2555 information at IRS.gov