CSS Profile: What is a Form 2555 - Foreign Earned Income Exclusion?
The CSS Profile is becoming more and more popular among colleges. More and more schools require the CSS Profile for financial aid consideration. The CSS Profile is much longer than the FAFSA, as colleges dig deeper into a family’s financial picture to determine the amount of institutional financial aid to offer. One section of the CSS Profile is related to a family’s taxes. Within the tax section, different 1040 tax schedules and forms are considered. We’ll learn more about Form 2555 - Foreign Earned Income Exclusion and how it applies to the CSS Profile.
CSS Profile & 1040 Form 2555 - Foreign Earned Income Exclusion
Let’s take a look at what a Form 2555 is and how it applies to the CSS Profile.
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What is a 1040 Form 2555 - Foreign Earned Income Exclusion?
Form 2555 is a tax form used by US citizens or resident aliens who work and earn income in a foreign country to claim the Foreign Earned Income Exclusion (FEIE). The FEIE allows qualifying individuals to exclude up to a certain amount of foreign earned income from their US federal income tax.
To be eligible for the FEIE, taxpayers must have foreign earned income, a tax home in a foreign country, and meet either the physical presence test or the bona fide residence test. The physical presence test requires that taxpayers be physically present in a foreign country for at least 330 full days during a 12-month period, while the bona fide residence test requires that taxpayers be a bona fide resident of a foreign country for an uninterrupted period that includes an entire tax year.
Form 2555 is used to calculate the amount of the foreign earned income exclusion and any housing exclusion or deduction that the taxpayer may be eligible for. It is filed with the taxpayer's annual income tax return (Form 1040) and can be used to reduce or eliminate the taxpayer's US federal income tax liability on their foreign earned income.
Form 2555 - Foreign Earned Income Exclusion & Completing the CSS Profile
In the Parent Tax Schedules and Forms section, the CSS Profile asks families which schedules and tax forms they completed. Based on the response to this question, additional questions will be populated. If you select that you did complete Form 2555, you will be asked additional questions related to the type of income and adjustments reported on your Form 2555.
How to Use Form 2555 to Complete CSS Profile Requirements
The CSS Profile does a good job overall when it comes to making it clear what questions they are asking and where you need to go to find the answers, especially related to your tax return. You can use the guidance provided on the CSS Profile to determine which lines to check in order to complete the corresponding questions on the CSS Profile.
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There is a lot to be gained from our free general financial aid advice, but it’s also a very individual process. If you have remaining financial aid questions, email us to discuss more or book an individual session.