If you choose the foreign housing exclusion, you must figure it before figuring your foreign earned income exclusion and cannot claim less than the full amount of housing exclusion to which you are entitled. Once you choose to exclude foreign housing amounts, you can’t take a foreign tax credit or deduction for taxes on income you can exclude.
Can a deduction for foreign housing be more than foreign earned income?
Your foreign housing deduction cannot be more than your foreign earned income less the total of (1) your foreign earned income exclusion, plus (2) your housing exclusion, if any. You would not have both a foreign housing deduction and a foreign housing exclusion unless during the tax year you were both self-employed and an employee.
How does the foreign earned income exclusion work?
In addition to the foreign earned income exclusion, you can also claim an exclusion or a deduction from gross income for your housing amount if your tax home is in a foreign country and you qualify for the exclusions and deduction under either the bona fide residence test or the physical presence test.
How is the foreign housing amount calculated on IRS Form 2555?
Your foreign housing amount is the total of your foreign housing expenses for the year minus the base housing amount. The computation of the base housing amount (line 32 of Form 2555) is tied to the maximum foreign earned income exclusion.
Is there a limit to the foreign earned income exclusion?
32 of Form 2555) is tied to the maximum foreign earned income exclusion. The amount is 16% of the exclusion amount (figured on a daily ba-sis), multiplied by the number of days in your qualifying period that fall within your 2020 tax year. For 2020, this amount is $47.04 per day ($17,216 per year). See Housing Amount under
