Once you determine that you qualify, you take the foreign earned income exclusion, the foreign housing exclusion, or deduction by completing the appropriate parts of Form 2555 and filing it with your Form 1040. If you have a foreign housing amount to exclude, you exclude that first, and then determine your foreign earned income exclusion.
Married Taxpayers
If you are married and both you and your spouse work abroad, and you both qualify, you can each take up to the maximum amount of the exclusion. Both of you do not have to meet the same test to qualify; you can each qualify under either the bona fide resident test or the physical presence test.
No Deductions or Credits on Excluded Income
If you elect to take the foreign earned income exclusion, you cannot take any deduction or credit related to the income you exclude. This includes any expenses, losses, or other deductions that would normally be allocable to the income.
Making the Election
Once you choose to claim an exclusion, that choice remains in effect for that year and all future years unless it is revoked. To revoke your choice, you must attach a statement to your return for the first year you do not wish to claim the exclusion(s). And, if you revoke your choice, you cannot claim the exclusion(s) again for your next 5 tax years without IRS approval.
Form 2555EZ
You may be able to use the simpler Form 2555-EZ if:
none of your foreign earned income was from self-employment,
your total foreign earned income did not exceed the maximum amount of the exclusion for that particular year,
you do not have any business or moving expenses, and
you do not claim the housing exclusion or deduction.