Form 2555 - Foreign Earned Income Exclusion, Housing Exclusion and Deduction

[Administrator]

Tax Guide for US Citizens or Resident Aliens living, working outside the United States

Form 2555 - Foreign Earned Income Exclusion, Housing Exclusion and Deduction

You can claim Foreign Earned Income Exclusion if you have foreign earned income and meet all the three requirements;

a) Foreign Tax Home

US Citizen or Resident Alien with a Foreign Tax Home. Tax home is the main place or work, business in a foreign country, and not the family home in United States.

b) Bona fide Residence Test

US Citizen or Resident Alien (has Tax treaty benefits or national of the Foreign Country), who is a bona fide resident in a foreign country. Bona fide residence means establishing a presence in a foreign country like extended stay, intention and purpose of your stay like for work or for business.

c) Physical Presence Test

US Citizen or Resident Alien who is physically present in a country for more than 330 days in a year.

Foreign Housing Exclusion and Deduction :

Foreign Housing exclusion applies for amount paid for a house (Rent, Utilities etc.,) in a foreign country, with employer provided funds.

Foreign Housing deduction applies for amount paid for a house in a foreign country, with self-employment earnings like involving in business activities.

If you donot have self employment income, you cannot claim Foreign housing deduction.


By Filing Form 2555 you may be able to claim upto $87,500 of your foreign earned income (foreign earned income minus foreign housing exclusion) in 2008.

If both you and your spouse work abroad, you can claim upto $ 171,400 in foreign earned income exclusion.

If you have questions, please Contact Us or post your questions in the Forum.