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Living Expenses Are Through the Roof - How to Deduct More Than 30% Allowance for Housing Exclusion & Reduce Tax Bill

Living Expenses Are Through the Roof - How to Deduct More Than 30% Allowance for Housing Exclusion & Reduce Tax Bill

10 Mar 2017

What is the housing exclusion?

If you qualify for the Foreign Earned Income Exclusion (FEIE), calculated through form 2555 on your tax return, you can also claim exclusion from gross income of your housing costs. In practice, what this means is that you can exclude far more than the $100k allocated to FEIE from your income, reducing your tax bill. Given that European living expenses have grown tremendously - this is key for those required to file a U.S tax return while living abroad.

What kind of costs qualify?

“Reasonable” expenses paid or incurred for housing outside of the U.S for you, your spouse and your dependents (assuming they lived with you). If you only qualify for FEIE for part of the year, then only the housing expenses for that part of the year are counted.

If you pay a broker fee, this is a reasonable expense. The cost of residential parking is a reasonable expense. But - if you choose to spend 3 months in the Ritz in Paris while looking for apartments and hanging at the Hemingway Bar, this is not reasonable.

As a reprieve, some of these fees can be deducted as moving expenses

Is it the same for every city? Geneva is more expensive than Bucharest.

No - the IRS understands the most important rule of real estate - location, location, location.

In general, the IRS places a limit of 30% of the maximum FEIE on housing expenses. In 2016, for most locations, this limit is $30,390 (30 percent of $101,300) if your qualifying period includes all of 2016 (or $83.03 per day if the number of days in your qualifying period that fall within your 2016 tax year is less than 366). This is the interesting part, though, as there are many exceptions. Not only is it broken down by country - but by city, and even neighborhood (your tax preparer will handle all of these calculations for you. In the table below we show the highest amount per country, but the actual table is far more precise (and far too long for this article)

Country	Location	Limitation on Housing Expenses (full year)	Limitation on Housing Expenses (daily)
Angola	Luanda	84,000	229.51
Argentina	Buenos Aires	56,500	154.37
Australia	Sydney	61,400	167.76
Austria	Vienna	35,400	96.72
Bahamas, The	Nassau	49,700	135.79
Belgium	Brussels	40,000	109.29
Bermuda	Bermuda	90,000	245.9
Brazil	Sao Paulo	56,600	154.64
Canada	Montreal	43,900	119.95
Cayman Islands	Grand Cayman	48,000	131.15
Chile	Santiago	37,500	102.46
China	Hong Kong	114,300	312.3
Colombia	Bogota	58,700	160.38
Costa Rica	San Jose	32,000	87.43
Democratic Republic of the Congo	Kinshasa	42,000	114.75
Denmark	Copenhagen	43,704	119.41
Dominican Republic	Santo Domingo	45,500	124.32
Ecuador	Quito	38,200	104.37
Estonia	Tallinn	46,600	127.32
France	Paris	68,600	187.43
Germany	Cologne	56,200	153.55
Ghana	Accra	36,000	98.36
Greece	Athens	33,600	91.8
Guatemala	Guatemala City	41,800	114.21
Guinea	Conakry	51,300	140.16
Guyana	Georgetown	35,000	95.63
Holy See, The	Holy See, The	45,700	124.86
Hungary	Papá	44,500	121.58
India	Mumbai	67,920	185.57
Indonesia	Jakarta	37,776	103.21
Ireland	Dublin	39,700	108.47
Israel	Tel Aviv	50,800	138.8
Italy	Milan	68,300	186.61
Japan	Osaka-Kobe	90,664	247.72
Kazakhstan	Almaty	48,000	131.15
Korea	K–16	54,200	148.09
Kuwait	Kuwait City	64,400	175.96
Luxembourg	Luxembourg	37,400	102.19
Macedonia	Skopje	35,400	96.72
Malaysia	Kuala Lumpur	46,200	126.23
Malta	Malta	55,100	150.55
Mexico	Mexico City	47,900	130.87
Netherlands	Hague, The	62,200	169.95
Netherlands Antilles	Curacao	45,800	125.14
New Zealand	Auckland	35,700	97.54
Nicaragua	Managua	31,800	86.89
Nigeria	Abuja	36,000	98.36
Norway	Oslo	34,400	93.99
Oman	Muscat	41,300	112.84
Panama	Panama City	35,500	96.99
Peru	Lima	39,100	106.83
Portugal	Lisbon	41,800	114.21
Qatar	Doha	42,744	116.79
Russia	Moscow	108,000	295.08
Singapore	Singapore	77,100	210.66
Slovenia	Ljubljana	48,000	131.15
Spain	Madrid	55,700	152.19
Switzerland	Geneva	93,300	254.92
Taiwan	Taipei	46,188	126.2
Tanzania	Dar Es Salaam	44,000	120.22
Thailand	Bangkok	59,000	161.2
Trinidad and Tobago	Port of Spain	54,500	148.91
Ukraine	Kiev	72,000	196.72
United Kingdom	London	82,000	224.04
Venezuela	Caracas	57,000	155.74
Vietnam	Hanoi	46,800	127.87

Ines Zemelman, EA

Founder of TFX