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Form 2555 means not paying taxes on over $100K in income for ex-pats and digital nomads
Form 2555, Foreign Earned Income, is a valuable tool for U.S. ex-pats and digital nomads living abroad because it allows you to EXCLUDE a portion of your foreign income from U.S. taxation.
This can mean significant tax savings for high-income ex-pats and digital nomads, but it also comes with limitations that must be carefully managed.
One of the biggest benefits of Form 2555 is the Foreign Earned Income Exclusion (FEIE), which for 2024 allows up to $126,500 in foreign-earned income to be excluded from U.S. taxation. If both spouses qualify, you can exclude up to $253,000 when filing jointly. The form also provides a Housing Exclusion or Deduction, allowing ex-pats to deduct certain housing costs exceeding 16% of the FEIE threshold.
This is especially helpful for those living in expensive cities like London or Hong Kong, with higher allowable housing exclusion. These provisions can significantly reduce your taxes. And for those whose income falls within the exclusion limits, it may even eliminate your U.S. tax liability entirely.
However, high-income earners must be aware of the limitations. Any income earned above the FEIE threshold is still subject to U.S. taxation, meaning those earning well over the exclusion amount…
