$17,216
Assuming that the entire taxable year of a qualified individual is within the applicable period, the base housing amount for 2020 is $17,216 ($107,600 x . 16). Similarly, the housing expense amount is also limited, based on a percentage of the maximum foreign earned income exclusion amount.
Do you have to figure out the foreign housing exclusion?
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 is the foreign earned income exclusion calculated?
The computation of the base housing amount (line 32 of Form 2555) is tied to the maximum foreign earned income exclusion. The amount is 16% of the maximum exclusion amount (computed on a daily basis), multiplied by the number of days in your qualifying period that fall within your tax year.
How does the FHE work for foreign housing?
The amount of housing expenses the individual can claim for FHE is the lesser of the limit for the location, or the actual expenses incurred, minus the base housing amount of 16% of the foreign earned income exclusion. Using the Dubai example, how would different housing costs affect the amount of foreign housing exclusion an individual receives?
