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EXPATRIATE TAX FORM 2555 Instructions

Form 2555 - IRS Tax returns for expatriate US citizens working outside United States.

If you are a US Citizen or Resident Alien (H1B L1 J1 TN visa taxes), and work outside the United States, you have to report your worldwide income, while filing United States Taxes Form 1040.

Use the 'Substantial Presence Test' calculator to determine if you are a Resident or Non Resident Alien in the United States. Non Resident Aliens do not have to declare their world wide income while filing US Taxes.

However you may be exclude a portion of your foreign income (for 2009 its $91,400) called;

a) Foreign Earned Income Exclusion

b) Foreign Housing Exclusion

c) Foreign Housing Deduction

d) Exclusion of meals and lodging

if you meet the following Three Requirements;

  1. Your Tax Home is in a Foreign Country

What is a Tax Home?

Tax Home is the main place of your home, business, work where you are engaged for several months in a year. If you are making short visits to a foreign country and coming back to United States, you cannot establish a tax home in a foreign country.


You are an architect and visit france two weeks every month, and come back to family in the United States, then your tax home is United States.

You are relocated to Dubai by your US company for 9 month, and in the 10th month you move your family to Dubai. You plan to live in Dubai for the next few years. Then you can choose Dubai as your tax home.

  1. You must have Foreign Earned Income

Foreign Income mainly includes the wages paid to you by your Foreign Employer.

Foreign Income does not Include;

a) Value of meals and lodging, Moving Expenses provided by employer

b) Pension, Annuity, Capital Gains, Alimony, Dividends,SS Benefits

c) Pay from US Government

  1. You must establish residency in a foreign country either through the Bona fide Residence Test or Physical Presence Test

a) Bona fide Residence Test - US Citizen - with Bona fide Residence in a Foreign Country for an entire tax year.

b) Bona fide Residence Test - Resident Alien - is a Citizen of a foreign country that has a tax treaty with United States, and is a Bona fide Resident in a Foreign Country for an entire tax year.

c) Physical Presence Test - US Citizen or Resident Alien Physically Present in a Foreign Country for atleast 330 days in a tax 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.

If you have any questions on Expatriate Tax Form 2555 - Foreign Earned Income Exclusion, please Contact us.

By Tax Expert    February 20th, 2020