If you are a U.S. citizen or green card holder living abroad and need irs form 2555 instructions, you are likely focused on reducing your U.S. tax burden while staying fully compliant. This guide will help you understand the steps, tests, and calculations involved in filing IRS Form 2555 for the 2025 tax year. Whether you are grappling with the foreign earned income exclusion or trying to figure out housing deductions, you can confidently tackle this form by following the sections below.

When you master these instructions, you will also gain clarity on how to meet your expat tax reporting obligations and maintain compliance with the IRS. Read on for a stress-free approach that helps you minimize risks and avoid costly errors.

Understand IRS Form 2555

IRS Form 2555 is designed to help you calculate how much of your foreign earned income you can exclude from U.S. taxation. It also covers housing exclusions or deductions. For 2025, you can exclude up to $130,000 of foreign earned income if you meet eligibility requirements. Keep in mind, you cannot exclude or deduct more than your total foreign earned income for the year.

  • Foreign earned income exclusion (FEIE): Allows eligible taxpayers to exclude up to $130,000 of income from U.S. tax.
  • Housing exclusion or deduction: Lets you exclude or deduct a portion of your foreign housing expenses, generally capped at $39,000 for most locations in 2025.

You can verify the current version of Form 2555, along with instructions, on the official IRS website.

Check if you qualify

Before you fill out Form 2555, confirm that you meet the following:

Tax home test

Your tax home must be in a foreign country. If you work abroad and your main place of business is located outside the U.S. or Puerto Rico, you likely satisfy this requirement.

Bona fide residence test or physical presence test

  1. Bona fide residence test
  • You must reside in a foreign country for an uninterrupted period that includes an entire tax year.
  • Military and government employees in foreign combat zones may also qualify, even if they maintain an abode in the U.S.
  1. Physical presence test
  • You must be physically present in one or more foreign countries for at least 330 full days in a 12-month period that partly overlaps with the tax year.

If you are unsure about these tests, refer to foreign earned income exclusion rules for more details on establishing your status abroad.

Calculate your foreign exclusions

Form 2555 helps you figure out two key amounts:

Foreign earned income exclusion

  • For 2025, you can exclude up to $130,000 of foreign income if you qualify under either residency test.
  • If you and your spouse both earn foreign income, each of you may individually qualify for up to $130,000, resulting in a combined maximum of $260,000.

Housing exclusion or deduction

  • The general housing expense limit in 2025 is $39,000 (30% of $130,000).
  • Certain high-cost areas may have higher limits, specified in IRS Notice 2025-16.
  • Expenses above those limits are not excludable or deductible.
  • If you relocated mid-year, you will need to prorate your housing expenses.

Gather necessary documents

To file Form 2555 accurately, you will need:

  • A record of days spent abroad to confirm you meet the Bona Fide Residence or Physical Presence tests.
  • Proof of foreign wages and income.
  • Documents showing foreign housing costs (rent, utilities, etc.) if claiming the housing exclusion or deduction.
  • Any relevant statements supporting your claim for combat zone tax home (if applicable).

We recommend compiling these details with your US expat tax documentation well in advance.

File your Form 2555

Filing IRS Form 2555 involves attaching it to your Form 1040. Here are the main steps:

  1. Complete the personal and general information at the top of Form 2555.
  2. Indicate which residency test you meet.
  3. Enter foreign earned income details in Part IV.
  4. Figure your housing exclusion or deduction in Part VI.
  5. Transfer the final exclusion amounts to your Form 1040.

Make sure you file on time to avoid penalties. As an expat, you automatically receive an extension until June 15, 2026, for the 2025 tax year if your tax home is abroad, though interest will still accrue after April 15, 2026. If you need more time, you can file for an additional extension. For more on extensions and U.S. deadlines, see our expat tax reporting deadlines.

Avoid common mistakes

Mistakes on Form 2555 often lead to processing delays or IRS notices. Here are a few you should watch for:

  • Missing residency dates: Record your travel dates accurately.
  • Overstating exclusions: Do not exceed the $130,000 foreign earned income cap or the allowable housing limit.
  • Forgetting to attach Form 2555 to your Form 1040: The IRS needs both forms together.
  • Miscalculating housing expenses across multiple locations: If you moved between high-cost and regular-cost areas, apply the correct partial-year limits.

You can gain more peace of mind by checking out our expat tax compliance checklist. It covers additional forms and actions commonly required for U.S. taxpayers living abroad.

Explore helpful resources

Staying compliant involves more than just one form. You may also need to report foreign bank accounts using FBAR filing requirements US expats. Additional IRS publications can deepen your understanding:

  • Publication 54 (Tax Guide for U.S. Citizens and Resident Aliens Abroad)
  • Publication 519 (U.S. Tax Guide for Aliens)

You can find these on the official IRS website if you need further reading.

Get personalized guidance

At American Pacific Tax, we understand that every expat’s situation is unique. Whether you are juggling self-employment abroad or need advice on US expat tax compliance requirements, our dedicated team can help simplify the process. We are here to reduce your IRS risk and ensure you remain stress-free throughout the tax season.

If you still have questions about IRS Form 2555 instructions or other reporting obligations, reach out to schedule a personalized compliance review or consultation. We will help you steer clear of errors, maximize your exclusions, and avoid unnecessary penalties. It is your turn to file with confidence and focus on enjoying your life abroad.