IRS Form
IRS Form 2555: Foreign Earned Income Exclusion
Form 2555 is the US tax form used to claim the Foreign Earned Income Exclusion. It allows qualifying Americans living abroad, including in the UK, to exclude a portion of their foreign earned income from US tax, and is an alternative to claiming the Foreign Tax Credit.
The short answer
What Form 2555 is
Form 2555 is the US tax form through which individuals claim the Foreign Earned Income Exclusion. The exclusion allows qualifying US taxpayers who live and work abroad to exclude a portion of their foreign earned income from US taxation. For an American employed in the UK, it can be a significant tool for reducing exposure to double tax on salary and similar earnings.
The exclusion applies to earned income, such as wages and self-employment income, rather than to passive income like dividends or interest.
Why Form 2555 exists
Because the United States taxes citizens on worldwide income, Americans working abroad would otherwise face US tax on income they earn entirely overseas. The Foreign Earned Income Exclusion exists to relieve that burden for genuine residents abroad, recognising that their earned income already has a strong connection to their country of residence.
Who generally files Form 2555
- US citizens and residents living abroad with foreign earned income.
- Americans employed or self-employed in the UK seeking to exclude qualifying earnings.
- Taxpayers weighing the exclusion against the Foreign Tax Credit.
- Long-term expatriates whose residence abroad supports an exclusion claim.
How it fits
How Form 2555 fits into the filing process
Confirm foreign earned income
Identify the earned income arising from your work abroad that could qualify for the exclusion.
Establish qualification
Determine whether you meet the residence or physical-presence basis for claiming the exclusion.
Complete the exclusion calculation
Use Form 2555 to calculate the amount of foreign earned income you can exclude.
File with your income tax return
Submit the form together with your US income tax return so the exclusion is reflected in your liability.
Key facts at a glance
- Form name
- Foreign Earned Income Exclusion
- Applies to
- Foreign earned income
- Filed with
- Your US income tax return (IRS)
- Alternative mechanism
- Foreign Tax Credit (Form 1116)
- Qualification basis
- Residence or physical presence abroad
How Form 2555 relates to other filings
Form 2555 is most naturally understood alongside Form 1116. Both aim to prevent double taxation of foreign income, but the exclusion removes qualifying earned income from the US base, while the credit offsets US tax with foreign tax paid. Many Americans in the UK need to weigh the two, and the interaction with the US–UK tax treaty adds further nuance. Our calculator helps illustrate the trade-off.
Related resources
Frequently asked questions
Form 2555 is used to claim the Foreign Earned Income Exclusion, which allows qualifying US taxpayers living abroad to exclude a portion of their foreign earned income from US taxation.
Form 2555 excludes qualifying foreign earned income from US tax, while Form 1116 credits foreign taxes paid against US tax. They are alternative approaches to relieving double taxation, and the better choice depends on your situation.
Eligibility generally rests on being a genuine resident abroad or being physically present abroad for a sufficient period, together with having foreign earned income. These are mechanisms rather than fixed numbers.
It is completed and filed as part of your annual US income tax return, supporting the exclusion you claim.
Considering the Foreign Earned Income Exclusion?
We help Americans in the UK determine whether the exclusion or the credit better fits their circumstances, and file accordingly.