Yes! The Foreign Housing Exclusion allows you to exclude from taxable income the portion of your employer-provided housing expenses that exceeds 16% of the Foreign Earned Income Exclusion (FEIE) limit for the applicable tax year. However, there is an upper limit on how much you can exclude for foreign housing expenses, which varies depending on your location.
This exclusion is particularly beneficial if your income exceeds the FEIE threshold, as it reduces the taxable portion of your income even further. Additionally, the Foreign Tax Credit (FTC) can provide further relief by offsetting US taxes with foreign taxes paid. Both the FEIE and FTC are fully supported by the MyExpatTaxes software.
Which expenses are allowed?
Qualified expenses for the Foreign Housing Exclusion go beyond just rent. They also include:
- Mortgage interest.
- Home utilities (all utilities except phone expenses).
- Personal property insurance.
- Rental of furniture and accessories.
- Household repairs.
- Residential parking.
How do I add housing expenses to my return?
You can add foreign housing expenses in our software as follows:
- Click “More Deductions” in the left navigation panel, and select “Housing Expenses” from the sub-menu.
- You’ll be asked whether your foreign housing expenses exceed the current threshold and, if so, the software will guide you to input all relevant expenses.
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