Understanding the Foreign Housing Exclusion and Deduction for U.S. Expats

Housing expenses can be a significant burden for U.S. expats, but the Foreign Housing Exclusion and Deduction offer relief. Here’s how these provisions work and how they can save you money.

What is the Foreign Housing Exclusion/Deduction? These provisions allow expats to exclude or deduct qualified housing expenses from their taxable income. To qualify, your housing costs must exceed a base housing amount determined by the IRS.

What Qualifies as Housing Expenses?

• Rent

• Utilities (excluding telephone charges)

• Parking fees

• Rental furniture costs

• Nonrefundable lease fees
  

Sarah, a U.S. expat in Tokyo, spent $30,000 on housing in 2023. After subtracting her base housing amount of $17,000, she excluded $13,000 from her taxable income using the Foreign Housing Exclusion.

How to Claim

• File Form 2555 along with your tax return.

• Ensure you meet the same qualifications as the FEIE (BFR or PPT).
  

How Arc&Ledger Can Help We assist expats in calculating and claiming the Foreign Housing Exclusion or Deduction to maximize tax savings. Contact us today.