{"id":64045,"date":"2025-11-14T12:28:41","date_gmt":"2025-11-14T16:28:41","guid":{"rendered":"https:\/\/www.manaycpa.com\/?p=64045"},"modified":"2025-11-14T12:28:41","modified_gmt":"2025-11-14T16:28:41","slug":"foreign-housing-exclusion","status":"publish","type":"post","link":"https:\/\/profaj.co\/denememanay\/foreign-housing-exclusion\/","title":{"rendered":"Foreign Housing Exclusion"},"content":{"rendered":"

Many U.S. citizens may choose to live abroad for personal and professional reasons. Also, they may choose to move abroad temporarily or permanently. From a taxation perspective, all these decisions have implications. Essentially, the United States taxes its citizens on worldwide income, which means if you are a U.S. citizen, you must file a tax return even if you live overseas.<\/span>\u00a0<\/span><\/p>\n

However, you can claim the foreign housing exclusion to avoid double taxation, provided you meet specific criteria. In this guide, we will discuss in detail the foreign housing exclusion, who qualifies for it, and how you can claim this deduction.<\/span>\u00a0<\/span><\/p>\n

What is the Foreign Housing Exclusion?<\/span><\/b>\u00a0<\/span><\/h2>\n

The Foreign Housing Exclusion is a tax provision that falls under <\/span>Section 911<\/span><\/a> of the IRS Code. As the name suggests, this option allows taxpayers to claim certain housing-related deductions from their gross income. The primary goal of this deduction is to reduce the burden of maintaining a house in foreign countries, where the cost of living can be much higher than in the United States.<\/span>\u00a0<\/span><\/p>\n

How It Helps U.S. Expats Save on Taxes<\/span><\/b>\u00a0<\/span><\/h3>\n

The Foreign Housing Exclusion allows taxpayers to deduct qualified housing expenses, like rent, utilities, and insurance premiums, from their gross income. For example, if you earn $150,000 a year in London and pay $50,000 as rent and utilities, you can deduct them, so taxes are calculated only on the remaining $100,000. This option allows taxpayers to retain more of their income. It\u2019s important to note that the amount that can be deducted must be the actual amount spent on housing in a foreign country and is subject to the limits set by the IRS.<\/span>\u00a0<\/span><\/p>\n

Who Qualifies for This Exclusion<\/span><\/b>\u00a0<\/span><\/h3>\n

To qualify for this exclusion, an individual taxpayer must meet one of the two critical tests set by the IRS – the Bona Fide Residence Test and the Physical Presence Test.<\/span>\u00a0<\/span><\/p>\n

As per the Bona Fide Residence Test, an individual must be a resident of a foreign country throughout the entire tax year without any interruptions. You are allowed to visit the U.S. or any other country for a temporary period, but you must have a clear intent to return to your foreign country.<\/span>\u00a0<\/span><\/p>\n

The Physical Presence Test, on the other hand, requires you to have been physically present in a foreign country for at least 330 full days during a 12-month period.<\/span>\u00a0<\/span><\/p>\n

Additionally, you must have earned income in the foreign country during the tax year and paid for your living expenses with that income. Note that the U.S. government employees, including military personnel, do not qualify for this exclusion, as their salaries are paid by the U.S. government.<\/span>\u00a0<\/span><\/p>\n

Key Housing Expenses That Count<\/span><\/b>\u00a0<\/span><\/h3>\n

Not all housing expenses can be claimed under this provision. The IRS lays down the following items as qualified housing costs:<\/span>\u00a0<\/span><\/p>\n