HOUSING DEDUCTION

If you are self-employed and your housing amount is not provided by or for an employer, you can deduct it in arriving at your adjusted gross income. However, the deduction is limited to the amount your foreign earned income for the tax year is more than the excluded foreign earned income and housing amount.

FOREIGN HOUSING CARRYOVER

If you cannot deduct all of your housing amount in a tax year because of the limit, you can carry over the unused part to the next year. You can deduct this carryover to the extent the limit for that year (your foreign earned income minus the foreign earned income and housing amount you exclude) is more than your housing deduction for that year. You cannot carry over any remaining amount to any future tax year.

Choosing the exclusion(s). You make separate choices to exclude foreign earned income and/or to exclude or deduct your foreign housing amount. If you choose to take both the foreign housing exclusion and the foreign earned income exclusion, you must figure your foreign housing exclusion first. Your foreign earned income exclusion is then limited to the smaller of (a) your annual exclusion limit or (b) the excess of your foreign earned income over your foreign housing exclusion.

Once you choose to exclude your foreign earned income or housing amount, that choice remains in effect for that year and all future years unless you revoke it. You can revoke your choice for any tax year. However, if you revoke your choice for a tax year, you cannot claim the exclusion again for your next 5 tax years without the approval of the IRS.

Exclusion of employer-provided meals and lodging. If as a condition of employment you are required to live in a camp in a foreign country that is provided by or for your employer, you can exclude the value of any meals and lodging furnished to you, your spouse, and your dependents. For this exclusion, a camp is lodging that is:

  1. Provided for your employer's convenience because the place where you work is in a remote area where satisfactory housing is not available to you on the open market within a reasonable commuting distance,
  2. Located as close as practicable in the area where you work, and
  3. Provided in a common area or enclave that is not available to the public for lodging or accommodations and that normally houses at least 10 employees.
foreign housing deduction