What is Foreign Housing Deduction?
A deduction allowing self-employed US expats to deduct qualifying housing expenses that exceed the base housing amount.
Definition
The Foreign Housing Deduction is available to self-employed US citizens and resident aliens working abroad, allowing them to deduct reasonable foreign housing expenses that exceed the base housing amount (16% of the FEIE limit). Unlike the Foreign Housing Exclusion for employees, the deduction is taken as an adjustment to income on Form 1040. The deduction can only offset foreign earned income and cannot create a net loss.
Who Needs to Know This?
Self-employed US citizens and resident aliens living abroad who pay their own housing expenses and qualify for the FEIE.
Key Deadline
Claimed on Form 2555 with annual tax return
Potential Penalties
N/A - this is a benefit
Related Forms
Common Mistakes to Avoid
- 1Trying to use the housing deduction to create a net loss
- 2Not understanding the deduction is limited to foreign earned income
- 3Including non-qualifying expenses
- 4Using the exclusion instead of deduction when self-employed
Related Terms
Need Help with Foreign Housing Deduction?
Our team of EAs and CPAs specializes in cross-border taxation and can help you navigate Foreign Housing Deduction requirements.
Ready to Get Started?
Schedule a consultation or explore our services to see how we can help with your tax and accounting needs.
Need immediate assistance? Call us at +1 (409) 916-8209