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> Information provided on this site is for general guidance only and is often simplified. Actual IRS procedures are complex, and taxpayers should obtain professional assistance or use IRS sources for complete information.


Tax Position Of US Citizens Overseas
The concept of 'offshore' is not very useful to a US national from a residence point of view.

Foreign Earned Income Exclusion
The income must be for services performed in a foreign country during a period of foreign residence or presence, whichever applies.

Foreign Housing Exclusion
To claim the housing exclusion, a person must meet the Physical Presence Test or the Bona Fide Resident Test.

The Tax Reconciliation Act 2005
The new law caps the Housing Exclusion at 30% of the foreign earned-income exclusion.

Foreign Tax Credits
Foreign taxes paid by a US taxpayer can often be credited against US tax liability or deducted in figuring taxable income on a US income tax return.



Information provided on this site is for general guidance only and is often simplified. Actual IRS procedures are complex, and taxpayers should obtain professional assistance or use IRS sources for complete information.

Foreign Housing Exclusion

To claim the housing exclusion, a person must meet the Physical Presence Test or the Bona Fide Resident Test.

The following expenses qualify for the foreign housing exclusion:

  • Rent, or the fair rental value of housing;
  • Repairs;
  • Utilities other than telephone;
  • Real property and personal property insurance;
  • Occupancy taxes;
  • Nonrefundable security deposits or lease payments;
  • Furniture rental;
  • Residential parking fees;
  • Tax equalization payments paid by the employer;
  • Education expenses for dependent children.

Expenses which do not qualify include interest and taxes, the cost of buying property, domestic labor, purchased furniture, depreciation of property or improvements.

The US Treasury Department and Internal Revenue Service issued Notice 2006-87 in October 2006, which provided adjustments to the limitation on housing expenses for the purposes of section 911 of the Internal Revenue Code (Code) for specific locations, on the basis of geographic differences in housing costs relative to housing costs in the United States.

The Tax Increase Prevention and Reconciliation Act of 2005 (TIPRA) made several changes to section 911, one of which effectively placed a limit on the amount of housing costs that could be taken into account under that section. TIPRA provided the Treasury Department with authority to adjust the new housing cost limitation based on geographic differences in housing costs relative to housing costs in the United States.

In the Notice, using the approach suggested in the legislative history to TIPRA, the Treasury exercised its authority to increase the housing cost limitation, setting forth new higher housing cost amounts for specific locations. The relief provided by the Notice is retroactive to the effective date of TIPRA.

The full text of the Notice can be found here.

In 2007, the IRS again revised the limitation on housing expenses for the purposes of section 911 of the Internal Revenue Code (Code) for specific locations, on the basis of geographic differences in housing costs relative to housing costs in the United States. This notice provides certain modifications and additions to the adjusted limitations on housing expenses published in Notice 2006-87.

Starting with the 2006 tax year, the amount of qualified housing expenses eligible for the housing exclusion and housing deduction was limited.

The limitation on housing expenses is generally 30% of the maximum foreign earned income exclusion. For 2009, the housing amount limitation is $27,420 for the tax year. However, the limit will vary depending upon the location of the qualifying individual’s foreign tax home and the number of qualifying days in the tax year.

BACK TO TOP

Tax Position Of US Citizens Overseas
The concept of 'offshore' is not very useful to a US national from a residence point of view.

Foreign Earned Income Exclusion
The income must be for services performed in a foreign country during a period of foreign residence or presence, whichever applies.

Foreign Housing Exclusion
To claim the housing exclusion, a person must meet the Physical Presence Test or the Bona Fide Resident Test.

The Tax Reconciliation Act 2005
The new law caps the Housing Exclusion at 30% of the foreign earned-income exclusion.

Foreign Tax Credits
Foreign taxes paid by a US taxpayer can often be credited against US tax liability or deducted in figuring taxable income on a US income tax return.


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This feed is published daily with selected new or updated content from across the Lowtax Network. For a list of Lowtax Network sites, many of which feature daily news, see below.

 
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Lowtax Network Sites
Lowtax Portal: 'Low-tax' business and investment in the top 50 jurisdictions covered in exceptional detail.
Tax News: Global tax news, continuously updated through the day.
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US Tax Network: The resource for free online US taxation information, covering: corporate tax, individual tax, international tax, expatriates, sales and e-commerce tax, investment tax.
NEW! Personal Business Tax Guide: Providing essential tax news and information on business for contractors, entrepreneurs, professionals, small businesses, artists, sportspersons and entertainers.
 
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