US Expat Tax – Foreign Earned Income Exclusion (Form 2555) FAQs
Frequently Asked Questions
If eligible, you can claim a foreign tax credit on foreign income taxes owed and paid by filing Form 1116 with your U.S. income tax return. See Publication 514, Foreign Tax Credit for Individuals, for more details.
You may also be eligible for the foreign earned income exclusion. See the “Foreign Earned Income and Housing: Exclusion – Deduction” section of Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad, for more details. Please note that for purposes of the foreign earned income exclusion, the foreign housing exclusion, and the foreign housing deduction, foreign earned income does not include any amounts paid by the United States or any of its agencies to its employees. This includes amounts paid from both appropriated and nonappropriated funds.
There are specific requirements that you must satisfy to be eligible to claim the foreign earned income exclusion. See the “Foreign Earned Income and Housing: Exclusion – Deduction” section in Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad, for more details.
Your tax home must be in the foreign country or countries throughout your period of bona fide residence or physical presence. For this purpose, your period of physical presence is the 330 full days during which you are present in a foreign country or countries, not the 12 consecutive months during which those days occur.
U.S. citizens may qualify under either test. But, there are specific definitions for U.S. resident aliens under each test.
Physical Presence Test
To meet this 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 consecutive months. A full day means the 24-hour period that starts at midnight.
Bona Fide Residence Test
To meet this test, you must be one of the following:
•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 (January 1-December 31, if you file a calendar year return), or
•A U.S. resident alien who is a citizen or national of a country with which the United States has an income tax treaty in effect and who is a bona fide resident of a foreign country, or countries, for an uninterrupted period that includes an entire tax year (January 1-December 31, if you file a calendar year return).
Whether you are a bona fide resident of a foreign country depends on your intention about the length and nature of your stay. Evidence of your intention may be your words and acts. If these conflict, your acts carry more weight than your words. Generally, if you go to a foreign country for a definite temporary purpose and return to the United States after you accomplish it, you are not a bona fide resident of the foreign country.
The two tests differ in that one is based exclusively on physical presence while the other is based on a taxpayer’s intentions.
•You did not have any self-employment income for the year,
•Your total foreign earned income did not exceed the maximum foreign earned income exclusion threshold for the corresponding tax year,
•You did not have any business or moving expenses, and
•You do not claim the housing exclusion or deduction.