General Instructions

Do not include on Form 1040, line 64 (federal income tax withheld), any taxes an employer withheld from your pay and paid to the foreign country's tax authority instead of to the U.S. Treasury.

Purpose of Form

If you qualify, you can use Form 2555 to figure your foreign earned income exclusion and your housing exclusion or deduction. You cannot exclude or deduct more than your foreign earned income for the year.

You may be able to use Form 2555-EZ, Foreign Earned Income Exclusion, if you did not have any self-employment income for the year, your total foreign earned income did not exceed $99,200, you do not have any business or moving expenses, and you do not claim the housing exclusion or deduction. For more details, see Form 2555-EZ and its separate instructions.

General Information

If you are a U.S. citizen or a U.S. resident alien living in a foreign country, you are subject to the same U.S. income tax laws that apply to citizens and resident aliens living in the United States.

Note.   Specific rules apply to determine if you are a resident or nonresident alien of the United States. See Pub. 519, U.S. Tax Guide for Aliens, for details.

Foreign country.    A foreign country is any territory under the sovereignty of a government other than that of the United States.

  The term “foreign country” includes the country's territorial waters and airspace, but not international waters and the airspace above them. It also includes the seabed and subsoil of those submarine areas adjacent to the country's territorial waters over which it has exclusive rights under international law to explore and exploit the natural resources.

  The term “foreign country” does not include U.S. possessions or territories. It does not include the Antarctic region.

Who Qualifies

You qualify for the tax benefits available to taxpayers who have foreign earned income if both of the following apply.

  • You meet the tax home test (discussed later on this page).

  • You meet either the bona fide residence test or the physical presence test, discussed later.

Note.   Income from working abroad as an employee of the U.S. Government does not qualify for either of the exclusions or the housing deduction. Do not file Form 2555.

Tax home test.   To meet this test, your tax home must be in a foreign country, or countries (see Foreign country, earlier), throughout your period of bona fide residence or physical presence, whichever applies. For this purpose, your period of physical presence is the 330 full days during which you were present in a foreign country, not the 12 consecutive months during which those days occurred.

  Your tax home is your regular or principal place of business, employment, or post of duty, regardless of where you maintain your family residence. If you do not have a regular or principal place of business because of the nature of your trade or business, your tax home is your regular place of abode (the place where you regularly live).

  You are not considered to have a tax home in a foreign country for any period during which your abode is in the United States. However, if you are temporarily present in the United States, or you maintain a dwelling in the United States (whether or not that dwelling is used by your spouse and dependents), it does not necessarily mean that your abode is in the United States during that time.

Example.

You are employed on an offshore oil rig in the territorial waters of a foreign country and work a 28-day on/28-day off schedule. You return to your family residence in the United States during your off periods. You are considered to have an abode in the United States and do not meet the tax home test. You cannot claim either of the exclusions or the housing deduction.

Travel to Cuba

Generally, if you were in Cuba in violation of U.S. travel restrictions, the following rules apply.

  • Any time spent in Cuba cannot be counted in determining if you qualify under the bona fide residence or physical presence test.

  • Any income earned in Cuba is not considered foreign earned income.

  • Any housing expenses in Cuba (or housing expenses for your spouse or dependents in another country while you were in Cuba) are not considered qualified housing expenses.

Note.

If you performed services at the U.S. Naval Base at Guantanamo Bay, you were not in violation of U.S. travel restrictions.

Additional Information

Pub. 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad, has more information about the bona fide residence test, the physical presence test, the foreign earned income exclusion, and the housing exclusion and deduction. You can get this publication from most U.S. Embassies and consulates or by writing to: National Distribution Center, 1201 N. Mitsubishi Motorway, Bloomington, IL 61705-6613. You can also download this publication (as well as other forms and publications) at IRS.gov.

Waiver of Time Requirements

If your tax home was in a foreign country and you were 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. You must be able to show that you reasonably could have expected to meet the minimum time requirements if you had not been required to leave. Each year the IRS will publish in the Internal Revenue Bulletin a list of the only countries that qualify for the waiver for the previous year and the dates they qualify. If you left one of the countries during the period indicated, you can claim the tax benefits on Form 2555, but only for the number of days you were a bona fide resident of, or physically present in, the foreign country.

If you can claim either of the exclusions or the housing deduction because of the waiver of time requirements, attach a statement to your return explaining that you expected to meet the applicable time requirement, but the conditions in the foreign country prevented you from the normal conduct of business. Also, enter “Claiming Waiver” in the top margin on page 1 of Form 2555.

When To File

A 2014 calendar year Form 1040 is generally due April 15, 2015.

However, you are automatically granted a 2-month extension of time to file (to June 15, 2015, for a 2014 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 you take this extension, you must attach a statement to your return explaining that you meet these two conditions.

The automatic 2-month extension also applies to paying the tax. However, you will owe interest on any tax not paid by the regular due date of your return.

When to claim the exclusion(s).   The first year you plan to take the foreign earned income exclusion and/or the housing exclusion or deduction, you may not yet have met either the physical presence test or the bona fide residence test by the due date of your return (including the automatic 2-month extension, discussed earlier). If this occurs, you can either:
  1. Apply for a special extension to a date after you expect to qualify, or

  2. File your return timely without claiming the exclusion and then file an amended return after you qualify.

Special extension of time.

To apply for this extension, complete and file Form 2350, Application for Extension of Time To File U.S. Income Tax Return, with the Department of the Treasury, Internal Revenue Service Center, Austin, TX 73301-0045, before the due date of your return. Interest is charged on the tax not paid by the regular due date as explained earlier.

Amended return.

File Form 1040X, Amended U.S. Individual Income Tax Return, to change a return you already filed. Generally, Form 1040X must be filed within 3 years after the date the original return was filed or within 2 years after the date the tax was paid, whichever is later.

Where To File

Attach Form 2555 to Form 1040 when filed. Mail your Form 1040 to one of the special addresses designated for those filing Form 2555 or Form 2555-EZ. Do not mail your Form 1040 to the addresses associated with your state of residence if Form 2555 or Form 2555-EZ is attached. See the Instructions for Form 1040. The filing addresses are also available at www.irs.gov/uac/INTERNATIONAL-Where-to-File-Form-1040,-1040A,-and-1040EZ-Addresses-for-Taxpayers-and-Tax-Professionals.

Choosing the Exclusion(s)

To choose either of the exclusions, complete the appropriate parts of Form 2555 and file it with your Form 1040 or Form 1040X, Amended U.S. Individual Income Tax Return. Your initial choice to claim the exclusion must usually be made on a timely filed return (including extensions) or on a return amending a timely filed return. However, there are exceptions. See Pub. 54 for details.

Once you choose to claim an exclusion, that choice remains in effect for that year and all future years unless it is revoked. To revoke your choice, you must attach a statement to your return for the first year you do not wish to claim the exclusion(s). If you revoke your choice, you cannot claim the exclusion(s) for your next 5 tax years without the approval of the Internal Revenue Service. See Pub. 54 for more information.

Figuring tax on income not excluded.   If you claim either of the exclusions or the housing deduction, you must figure the tax on your nonexcluded income using the tax rates that would have applied had you not claimed the exclusions. See the Instructions for Form 1040 and complete the Foreign Earned Income Tax Worksheet to figure the amount of tax to enter on Form 1040, line 44. When figuring your alternative minimum tax on Form 6251, you must use the Foreign Earned Income Tax Worksheet in the instructions for Form 6251.

Earned income credit.   You cannot take the earned income credit if you claim either of the exclusions or the housing deduction.

Foreign tax credit or deduction.   You cannot take a credit or deduction for foreign income taxes paid or accrued on income that is excluded under either of the exclusions. If all of your foreign earned income is excluded, you cannot claim a credit or deduction for the foreign taxes paid or accrued on that income. If only part of your income is excluded, you cannot claim a credit or deduction for the foreign taxes allocable to the excluded income. See Pub. 514, Foreign Tax Credit for Individuals, for details on how to figure the amount allocable to the excluded income.

IRA deduction.   If you claim either of the exclusions, special rules apply in figuring the amount of your IRA deduction. For details, see Pub. 590, Individual Retirement Arrangements (IRAs).


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