What is Foreign Housing Exclusion?
An exclusion allowing qualifying US expat employees to exclude employer-provided housing amounts that exceed a base housing amount.
Definition
The Foreign Housing Exclusion allows US citizens and resident aliens working abroad as employees to exclude from income the employer-provided housing amounts that exceed a base housing amount (16% of the FEIE limit). The exclusion covers reasonable housing expenses such as rent, utilities (except phone), insurance, parking, and furniture rental. It is subject to location-specific limits set by the IRS. Only employees can claim the exclusion; self-employed individuals use the Foreign Housing Deduction instead.
Who Needs to Know This?
US citizen or resident alien employees working abroad who receive housing benefits from their employer and claim the FEIE on Form 2555.
Key Deadline
Claimed on Form 2555 with annual tax return
Potential Penalties
N/A - this is a benefit
Related Forms
Common Mistakes to Avoid
- 1Including non-qualifying expenses like purchased furniture or domestic help
- 2Not knowing the location-specific housing amount limits
- 3Confusing the housing exclusion (for employees) with the housing deduction (for self-employed)
- 4Not calculating the base housing amount correctly
Related Terms
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