Form 2555, line 44 question

[bjb7]

Hello! I am hoping someone can help me. 

I am a US citizen living abroad who will pass the physical presence test and is filling out Form 2555 for the foreign income exclusion. I worked IN the US in 2023 and from March to June worked specifically as a freelance writer, for which I have a 1099-NEC.  

I moved abroad in August 2023 and have lived in the foreign country since. 

I've filled out both Schedule SE, Schedule 2 and Schedule C to account for my self-employment period. I am working on Schedule 1. 

Line 44, Form 2555 has me stumped. I keep reading through its instructions and pages 22 to 25-ish of Publication 54, but I'm still unsure what it means.  My understanding is, page 22 of Publication 54 (third column) says self-employment deductions must be account for here. I take this to mean the "deduction for one-half of self-employment tax" calculated from Schedule SE line 13. 

But Form 2555's instructions say this amount must be those "that aren't allowed because they are allocable to the excluded income. This applies only to deductions definitely related to the excluded earned income" (p.6). So, is my self-employment from Schedule SE line 13 unrelated to the foreign income BECAUSE I earned it while in the US and separate from my current employer and position? ... I think that would make more sense because on Schedule 1 I deduct my entire self-employment profit (line 3) line 8d for line 10 anyway, and mark the self-employment adjustment from Schedule 1 line 26 onto Form 1040, line 10, so to have this amount (line 13 of Schedule SE) subtracted AGAIN from the figure (Form 1040 line 8-9) for line 11 on Form 1040 doesn't seem to make sense to me. It would seem that I've accounted for the deduction twice. 

Therefore, I think I should put "0" on line 44, Form 2555, but I wanted to make sure. I assume this is because my self-employment income was not related in any way to my foreign income?

Thank you so much for any help you can give me! I really appreciate it. 

[RobertB4444 · Accepted solution]

Form 2555 is for foreign earned income and is used to exclude income earned in a foreign country from being taxed in the United States.  Income that you earned while you were still in the United States can not be excluded using this form.  So none of the lines on the 2555 apply to the 1099-NEC that you received for your freelance writing job.

In order to qualify for the Physical Prescence test you need to be physically present in a foreign country for an entire year.  If you moved abroad in August of 2023 you do not qualify for the Physical Prescence Test.  You will as of August of 2024.  

You can qualify under the Bona Fide Residence Test if you are a citizen or national of the country that you have moved to.  If not you do not qualify for the Foreign Earned Income Exclusion in 2023.

If you paid any taxes in the country that you have relocated to in 2023 you do qualify to take a foreign tax credit.  You can deduct the taxes that you paid in the country where you are living from any taxes that you owe in the US.  That entry is under the 'Deductions and Credits' section of your federal return.

If you have not paid foreign taxes in 2023 then you will file your tax return as though you were still in the US and you will pay taxes on everything that you earned in 2023.

@bjb7