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Expatriate Tax Returns

Foreign Housing

Foreign Housing Exclusion

If you are living abroad and are receiving income from your employer for housing, you may be eligible for the Foreign Housing Exclusion. Employers may offer housing funds directly to you or may include them as part of your overall income. Both options are acceptable qualifies for the exclusion for the deduction. Those who are self-employed can also receive the deduction. The costs of renting an apartment and repairs, utilities, and insurance are deductible. Extra expenses such as furniture, television, or home improvements are not eligible. The IRS calculates your Foreign Housing amount as the “expenses for the year minus the base housing amount.” Housing limits are enforced based on where you reside. Use form 2555 to calculate your amount. (https://www.irs.gov/forms-pubs/about-form-2555). Give us a call with any questions or concerns on this deduction in particular or any general tax information.
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Foreign Housing

Foreign HousingForeign Housing

There are two different aspects related to foreign housing:  deductions and exclusions, although they do have similar tax implications. The main difference between the two is that the exclusion must be employer-provided while the deduction requires the taxpayer to have self-employment income.

 

Foreign Housing Deductions

For the foreign housing deduction it only applies to amounts paid for with self-employment wages. No self-employment income, then no foreign housing deduction. If you have received both self-employment and employee wages then you are able to deduct part of your housing amount and omit part of it with limitations.

 

The foreign housing deduction may not be more than your foreign earned income but less than the total of the foreign earned income exclusion plus the housing exclusion.

 

Foreign Housing Exclusion

This exclusion applies only to amounts considered paid for with employer-provided dollars that is included in your income. The employer-provided housing allowance may be paid or accrued, but included in your foreign taxable income for the year as wages, salary, compensation for housing expenses, payments by your employer as part of a tax equalization plan, and/or the fair rental value of company-owned housing supplied to you (unless that value is excluded from income under the exclusions of meals and lodging rules).

 

The foreign housing exclusion/deductions may reduce your income tax but it will not reduce the self-employment tax.

 

How to Claim the Foreign Housing Exclusion or Deduction

Since the exclusion and deduction or voluntary, only qualified individuals must choose to claim these. You will claim the foreign housing exclusion or deduction on Form 2555, which gets attached to your Form 1040.

 

Not sure if you qualify for Foreign Housing Exclusion or Deduction? Contact us today and we will be more than happy to help you out!