How to fill out 2555 Form

How to fill out 2555 Form: What You Should Know

Form 2555, which is a form you can use instead of Form 1040 and Form 1040A. The Form 2555 can be used to determine your foreign earned income exclusion. Information about how to estimate the foreign earned income exclusion. About the Foreign Earned Income Exclusion The foreign earned income exclusion allows a taxpayer who has earned income outside the United States by performing services to a foreign entity, for example a business, a person, or a partnership, to exclude up to 1,050 in foreign earned income (subject to the full exclusion amount). The exclusion only applies if the employment is a “qualified employment.” Qualified employment means a job in, or for the conduct of a trade or business in, foreign countries, or to a foreign branch (e.g., a branch office) of a U.S. company that has the legal capacity to hire U.S. workers. If you qualify (see the instructions below), the exclusion applies to your entire foreign source income. For information about the credit for foreign housing expenses (FHA), and more general information about the income of foreign entities, see the Instructions for Form 2555, Part 4 of 12, which are on page 7.   The foreign earned income exclusion works on a sliding scale based on your filing status, filing status change, marital status, and type of business. You are not required to use all the exclusion amount. Generally, you may use up to 40% of the exclusion amount in each year. The full exclusion amount (other than the foreign housing credit) may be more or less than 40% depending on your actual experience. Generally, the amount that you can exclude is the income-replacing exclusion plus the deduction you can claim. Note. You can't reduce or eliminate the foreign earned income exclusion by claiming (or claiming to have) foreign housing expenses. How to Claim the Foreign Earned Income Exclusion If the income you earn can be excluded as foreign earned income, you can claim the exclusion from wages, tips, or other sources of income. You can also use the foreign earned income exclusion to reduce your U.S. income tax by up to the actual exclusion amount. To figure whether you can exclude foreign earned income on your U.S.

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