I Form 2555 Exemption of Income Earned Abroad

Attach to Form 1040. Department of the Treasury 

Internal Revenue Service For taxable year ending (Rev. 11—78)

This Form is to be Used Only by United States Citizens and Certain Resident Aliens (See Instruction 1.)

Name of taxpayer Social security number

Foreign address (including Country) Your occupation

Name of employer

Employer's U.S.

address Foreign

Give the latest year for which you filed a U.S. income tax return Office where filed

For an explanation of the provisions under which earned income of citizens abroad is exempt, see instructions. You may obtain

forms from any Internal Revenue office, U.S. Embassy, or Consulate.

Check status under which you claim exemption of earned income from services abroad

Bona fide residence. Complete Parts I and Ill.

Physical presence. Complete Parts II and Ill.

Complete all items in the parts pertaining to your status. If an item does not apply, write “DOES NOT 

APPLY.” Failure to submit required information may result in disallowance of the claimed exemption.

To be Completed for Bona Fide Residence Only

1 Foreign country in which you claim bona fide residence Residence began , ended

(Date) (Date)

2 Kind of living quarters in foreign country Purchased house Rented house or apartment Rented room Quarters furnished by employer

3 Did your family live with you abroad during any part of the taxable year? Yes No

If “Yes,” for what period?

4 (a) Have you made a statement to the authorities of the foreign country you claim bona fide residence in that you are not a resident of that country? Yes No

Yes No

5 Complete the following for days present in the U.S. or its possessions during the taxable year:

6 (a) State any contractual terms or other conditions relating to the length of your employment abroad.

(b) State the type of visa you entered the foreign country under.

(c) Did your visa contain any limitations as to the length of your stay or employment in the foreign country? 

 If ''Yes,'' attach explanation.

(d) List the places where you have resided and the dates of residence since you left the U.S. to establish residence abroad.

(e) Did you maintain a home in the U.S. while residing abroad?

If ''Yes,'' show address of your home, whether it was rented, and the names and relationships of the occupants.

Part II To be Completed for Physical Presence Only

7 The 18-month period the exemption for physical presence in a foreign country is based on is from through

8 Enter all travel abroad during the 18-month period the exemption is based on, except travel between foreign countries that did not involve travel on

or over international waters for 24 hours or more. If the last entry is an arrival in a foreign country, insert number of full days to end of 18-month 

period. If there was no travel to report during the period, write in the schedule that you were physically present in a foreign country or countries 

during the entire 18-month period.

Full days

present in

country

Date and time departed Date and time arrived Name of country

(Including U.S.)

9 Enter the prior years you claimed exemption for income earned abroad under section 911

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Date arrived

in U.S.

Date

departed

from U.S.

Number of

days in U.S.

on business

Amount earned in U.S. on

business (Attach statement

showing computation.)

Date arrived

in U.S.

Date

departed

from U.S.

Number of

days in U.S.

on business

Amount earned in U.S. on

business (Attach statement

showing computation.)

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Number of

days in U.S.

on business

Amount earned in U.S. on

business (Attach statement

showing computation.)

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Part I

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(b) Are you required to pay income tax to the country you claim bona fide residence in?

It you made a statement to the authorities of the foreign country that you are not a resident, and the country holds you are

not subject to its income tax, you do not qualify for this U.S. exemption. (See Instruction 8(c).)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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 . . . . . . . . Yes No

Yes No

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Form 2555 (1977) (Rev. 11—78) Page 2

To be Completed for Both Bona Fide Residence and Physical Presence

10 Enter below your total earned income, including noncash remuneration. (See Instructions 7 and 8(d).)

Yes No

If “Yes,” see Instructions 10(a) and 11.

Do not report exempt income on your Form 1040, but enter all taxable income in the appropriate sections of the form. If you received all or part 

of your income in foreign currency, translate its exchange value into terms of U.S. dollars at the rates prevailing at the time you actually or 

constructively received the income.

Earned income (for personal services rendered in foreign countries)

11 (a) Total wages, salaries, bonuses, commissions, etc., received during this year

12 Pensions and annuities (See instruction 10(d).)

13 Allowable share of income for personal services rendered. (See Instructions 7 and 10(a).) 

(a) In business (including farming) or profession. (Attach Schedule C or F (Form 1040).)

(b) In a partnership (Give name, address, and nature of income.)

14 Noncash remuneration (Market value of property or facilities furnished by employer. Attach statement

 showing how determined.)

15 Other income (Specify.)

16 Allowances or reimbursements

17 Total earned income from sources outside the U.S.

18 Amount exempt (if exempt status changed during the taxable year, complete schedule below.)

19 Taxable income (Subtract line 18 from line 17. If less than zero, enter zero. Enter here and report on Form 1040.)

Schedule for Computation of Exemption Claimed in Part III, line 18, above.

20 Applicable exemption

21 Number of exemption qualifying days in taxable year 

22 Total number of days in taxable year

23 Percentage applicable (Divide the number of days on line 21 by the number of days on line 22.) 

24 Allowable exemption (Multiply the amount on line 20 by the percent on line 23.)

25 Total allowable exemption (Add amounts on line 24, columns A and B. Enter here and on line 18.)

(If more space is needed for any schedule, etc., attach statement.)

Part III

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Is part of the income (such as bonuses) attributable to services performed in past years or to be performed for years other than

this year?

 . . . . . . . . 

Exchange

rates used

Amount

(In U.S. dollars)

(b) Amount attributable to prior years or future years. (See Instructions 10(a) and 11.)

(c) Balance attributable to this year. (Subtract line 11(b) from line 11(a).)

(a) Home

(b) Car

(c) Other property or facilities (Specify.).

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Cost of living

Overseas differential

Family

Education

Home leave

Quarters

For any other purpose (Specify.)

(a) 

(b) 

(c)

(d)

(e)

(f)

(g)

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(The $20,000 and $25,000 exemptions are for full taxable years. Prorate them if your

exempt status changes during the taxable year. See Instructions 8(a)(ii) and 10(c).)

A

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B

c70—263–146–1

$20,000 $25,000

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$ $

$

% %
1. General.—To determine whether you 

must file Form 1040, see Who Must File on 

page 4 of that form's instructions. In 

determining whether you must file a return, 

be sure to include your income earned 

abroad even though it may qualify for tax 

exemption as explained below.

Form 2555 (1977) (Rev. 11–78) Detach at perforation and file only pages 1 and 2. Page 3

Instructions

Caution

Effect on Foreign Tax 

Credit.—If you exclude income 

earned abroad and choose to take 

the Foreign Tax Credit, you do not 

have to reduce your foreign taxes 

allowable for the credit by the 

earned income exclusion. Therefore, no entry for the exclusion 

should be made on Form 1116, 

Schedule B, column 5.

itemize your deductions. If so, and your zero 

bracket amount is more than your total 

itemized deductions, fill in Part II, Schedule 

TC (Form 1040).

and capital were material income-producing 

factors, a reasonable allowance as compensation for your personal services will be 

considered earned income. This earned 

income amount, however, cannot be more 

than 30 percent of your share of the net 

profits from the trade or business.

U.S. citizens in foreign countries are 

subject to the same U.S. income tax laws as 

those living in the U.S. However, there is an 

exception as to their earned income as 

defined in instruction 7, received for personal 

services rendered abroad. A limited amount 

of earned income may be exempt from tax if 

a citizen meets either the “bona fide 

residence” test or the “physical presence” 

test. (See Instructions 8 and 9.) Detailed 

information about these provisions may be 

found in a special edition of Publication 54, 

Tax Guide for U.S. Citizens Abroad, to be 

used only in preparing 1977 returns.

Resident aliens of the U.S. from certain 

foreign countries with whom tax treaties are 

in effect qualify for the benefits of section 

911(a)(2) of the Code (physical presence) to 

the same extent as U.S. citizens under 

“nondiscrimination” clauses of such treaties. 

To determine whether the country of which 

you are a citizen contains such a 

“nondiscrimination” clause in its treaty with 

the U.S., please get Publication 54, Tax 

Guide for U.S. Citizens Abroad.

2. How to file.—If you qualify for 

exemption on any part of your earned 

income from sources outside the U.S., show 

your exempt income and information 

supporting it on this form. Then attach it to 

your completed Form 1040.

If you earned your only income abroad

and all of it qualifies for exemption, you need 

only complete this form and attach it to a 

Form 1040 showing your name, address, 

social security number, and signature.

Report on your Form 1040, compensation 

earned in the U.S. for personal services 

performed before foreign residence began. 

Also report on Form 1040 all other items of 

gross income, including earned income that 

does not qualify for exemption (such as a 

pro rata part of your earned income if part of 

the personal services was rendered during 

temporary business trips to the U.S.).

If you engaged in a non-corporate trade 

or business in which both personal services 

 

Caution: If you qualify for the benefits of 

section 911 and you choose to take the 

Foreign Tax Credit you will be required to 

 

3. Where to file.—File Form 2555 with 

Form 1040 with the Internal Revenue 

Service Center, Philadelphia, PA 19255.

4. When to file.—April 15 is generally the 

due date for filing calendar year income tax 

returns. However, due to pending legislation 

which would have effected the amount of 

your exemption, the IRS had previously 

extended the due date for taxpayers residing 

or traveling outside the U.S.

This form has been revised to reflect 

recent passage of the law. If you have not 

filed your 1977 income tax return, complete 

this form and attach it to your Form 1040. No 

penalties will be assessed for failure to pay 

any tax due on the return if you file your 

return and pay the amount due by February 

15, 1979.

If you have already filed your 1977 return, 

you should complete Form 1040X and this 

Form 2555. If your tax is more than the 

amount shown on the original return, you 

should file the amended return promptly to 

avoid further interest.

5. Interest.—As indicated in the prior 

news releases, interest will be charged on 

any unpaid tax from the due date of the 

return until the date of payment.

6. Joint returns.—Alien spouse.—You 

may file a joint return if both you and your 

spouse are U.S. citizens and you both use 

the same taxable year. If you file a joint 

return complete separate Forms 2555 if each 

of you has exempt earned income.

Married persons eligible to file a joint 

return under these rules may do so even if 

one of them has exempt earned income and 

the other does not.

Generally, you may not file a joint return if 

either you or your spouse was a nonresident 

alien at any time during the taxable year (for 

exceptions see “Special Election for Aliens” 

on page 6 of Form 1040 Instructions). 

However, you may claim an exemption for a 

nonresident alien spouse who had no gross 

income from U.S. sources and was not the 

dependent of another taxpayer.

For taxable years beginning after 1976, 

certain community property laws do not 

apply for income tax purposes in the case of 

a citizen or resident of the U.S. who is 

married to a nonresident alien individual, and 

who has community income for the taxable 

year, if they do not elect to file a joint return. 

Detailed information may be found in 

Publication 54, Tax Guide for U.S. Citizens 

Abroad.

7. Earned Income.—Earned income from 

sources outside the U.S. means wages, 

salaries, professional fees, and other 

compensation for personal services actually 

rendered. It does not include compensation 

for personal services to a corporation that 

consists of a distribution of earnings or 

profits rather than a reasonable allowance 

as compensation for the personal services. It 

does not include dividends, capital gains, 

interest, etc.

8. Bona Fide residence (sec. 911(a)(1) 

Internal Revenue Code).

 (a) General.—

(i) If you are a bona fide resident of a 

foreign country or countries for an 

uninterrupted period which includes an entire 

taxable year, you can, subject to the rules in 

Instruction 10, exclude up to $20,000 or 

$25,000 of your earned income from 

personal services rendered abroad for each 

taxable year. For each of the first 3 

consecutive years of your bona fide foreign 

residence, you can exclude no more than 

$20,000 earned income for each year. The 

maximum exclusions for each year of bona 

fide foreign residence after the first 3 

consecutive years is $25,000.

(ii) Use the following example to 

determine the exclusion amount when the 

third consecutive year does not end with the 

last day of the taxable year:

Assuming the third consecutive year for a 

calendar year taxpayer ends on June 30, 

prorate both the $20,000 and $25,000 during 

that year. The $20,000 limitation will apply 

for January 1 through June 30, and the 

$25,000 limitation will apply for July 1 

through December 31.

(b) Determination of residence.—No 

specific rule can be stated for determining 

whether you are a bona fide resident of a 

foreign country, because the determination 

involves your intention as to the length and 

nature of your stay. Your intention to 

establish a bona fide residence in a foreign 

country may be evidenced by words and 

acts. If these conflict, more emphasis will be 

placed on acts than words. Generally, if you 

go to a foreign country for a definite purpose 

of a temporary nature and return to the U.S. 

after that purpose has been accomplished, 

you are not a bona fide resident of the 

foreign country. However, if accomplishing 

the purpose requires an extended and 

indefinite stay, and you therefore make your 

home in the foreign country, you may be a 

bona fide resident of the foreign country for 

Federal income tax purposes.

(c) Statement of nonresidence.—If you 

made a statement to the authorities of a 

foreign country in which you have earned 

income that you are not a resident of that 

country, and you have been held not subject 

to its income tax, you will not be considered 

a bona fide resident of that foreign country. If 

you made such a statement and a 

determination is being made as to whether 

you qualify as a bona fide foreign resident, 

provided no adverse determination has been 

made by the authorities of the foreign 

country on your nonresidence status, you 

will be considered not subject to the income 

tax of that foreign country.

(d) Treatment of noncash remuneration.—If you qualify as a bona fide resident 

and received noncash remuneration in the 

form of a right to use property or facilities 

(such as a home or car), it will be taxable in 

the same manner as any other 

compensation, subject to the $20,000 or 

$25,000 exclusion.

Note: If you qualify for the benefits of 

section 911, you cannot claim the earned 

income credit.

c70-263-146-1
Form 2555 (1977) (Rev. 11–78) Page 4

(e) Definitions.—

 (i) Entire taxable year.—If you use the 

calendar year as your taxable year, your 

entire taxable year is the period beginning 

January 1 and ending December 31.

(ii) Uninterrupted period.—The term 

uninterrupted period in 8(a)(i), refers to a 

U.S. citizen's bona fide residence and not to 

his or her physical presence in the foreign 

country.

9. Physical presence (sec. 911(a)(2)) 

Internal Revenue Code.

(a) General.—If you are physically 

present in a foreign country or countries for a 

total of at least 510 days during any period 

of 18 consecutive months, you can, subject 

to the rules in Instruction 10, exclude up to 

$20,000 of your earned income for each 

taxable year. You can do this provided the 

earned income is for personal services 

performed outside the U.S. and is 

attributable to the 18-month period.

(b) Determination of 18-month period and 

application of 510-day rule.—In figuring the 

minimum of 510 full days' presence in any 

foreign country or countries, add all separate 

periods of presence during the 18-month 

period. The 510 full days need not be 

consecutive, but may be interrupted by 

periods during which you are traveling over 

international waters or are otherwise not 

present in a foreign country. (For additional 

information and examples, please see the 

special edition of Publication 54, Tax Guide 

for U.S. Citizens Abroad, to be used only in 

preparing 1977 returns.)

(a) Rule of attribution.—In general, a 

taxpayer receives earned income in the 

same taxable year he or she performs 

services. This taxable year is used to 

determine the exemption under the bona fide 

residence and physical presence tests.

10. Special rules that apply to bona 

fide residence and physical presence.—

A taxpayer may receive earned income

in one taxable year for personal services 

performed in another. Under the rule of 

attribution, this earned income is 

considered as received in the taxable year in 

which the personal services are performed. 

However, to be exempt, earned income

must be received before the close of the 

taxable year following the year in which the 

services are performed. For example, if a 

cash basis taxpayer received $3,000 in 1977 

for services performed in 1976 he or she 

would include this $3,000 as 1976 earned 

income for determining the amount of 

exemption. If exempt, the $3,000 would be 

excluded from his or her income in 1977. 

Any amount not exempt must be reported on 

Form 1040 for 1977.

This rule applies only in determining the 

amount of the exemption and does not affect 

the reporting time of any amounts not 

exempt. In no case can amounts be 

attributed to any year in which the services 

performed are insubstantial. (For additional 

information, please see the special edition of 

Publication 54 mentioned previously, or 

contact any Internal Revenue Service office 

or representative.)

(b) Treatment of amounts paid by U.S. 

Government, etc.—Earned income paid to 

U.S. citizens by the U.S. or any of its 

instrumentalities is not exempt from tax 

under the bona fide residence or physical 

presence tests. This includes pay received 

from our Armed Forces' post exchanges, 

officers' and enlisted men's clubs and 

messes, motion picture services, and other 

similarly organized activities under the 

jurisdiction of the Armed Forces, even 

though they may be supported by 

nonappropriated funds.

(c) Accrual of exemption.—A U.S. citizen 

becomes entitled to the exemption on a daily 

basis throughout the taxable year. The 

number of days to be used in figuring the 

exemption is the number of days in the 

taxable year for which the exemption is 

claimed.

(d) Treatment of pensions or annuities.—In general, earned income received 

 

as pensions or annuities is not exempt if 

attributable to employer contributions made 

after December 31, 1962, for services 

rendered outside the U.S. after that date. 

(For rules on the allocation of employer 

contributions under prefunded pension or 

annuity plans, please see section 1.72–8 of 

the Income Tax Regulations. For rules on 

the treatment of pensions or annuities 

received under unfunded plans, please see 

sections 1.911–1(c) and 1.911–2(d)(5) of the 

Regulations.)

(e) Treatment of deductions.—Exclude 

any expenses, losses, or items otherwise 

deductible (except deductions allowed for 

personal exemptions) that are properly 

allocable to or chargeable against earned 

income exempt from tax under the bona fide 

residence or physical presence tests, in 

figuring your taxable income. If expenses 

incurred for services performed abroad are 

attributable to both exempt and nonexempt 

earned income, attach a statement showing 

the amounts attributable to both for income 

items on lines 11, 13, 14, and 15. Prorate 

such expenses, based on the ratio that your 

exempt earned income bears to your total 

earned income for services performed 

abroad. Do not claim expenses allocable to 

exempt income.

(f) Definition of foreign country.—The 

term foreign country means territory under 

the sovereignty of a government other than 

that of the U.S. and includes the air space 

over the territory. It does not include U.S. 

possessions.

11. Amounts attributable to services 

performed on or before December 31, 

1962.—If you received an amount after 

December 31, 1962, for services performed 

on or before that date, you may be able to 

exclude it from your gross income on the 

ground that a right to receive it existed on 

March 12, 1962. Such a right (whether 

forfeitable or nonforfeitable) is considered to 

exist on March 12, 1962, if it is in a contract, 

agreement, plan, or provision of foreign law 

in force on March 12, 1962. (For more 

information, please see section 1.911–1(c) 

of the Income Tax Regulations or contact 

any Internal Revenue Service office or 

representative.)

U.S. GOVERNMENT PRINTING OFFICE c70—263–146–1

c70—263–146–1

(c) Definition of a full day.—Full day 

means a period of 24 consecutive hours 

beginning at midnight.