Government Affairs

IRS Provides Higher Amounts for Foreign Housing Exclusion

Under section 911,  individuals abroad may claim an exclusion on their U.S tax return for foreign earned income, and foreign housing provided by the employer. Both amounts are limited. However, Notice 2018-33, April 23, 2018, provides higher housing amounts for many foreign jurisdictions.

Companies with expatriate employees will want to take advantage of these new numbers in computing tax equalization amounts.


For 2018:

  • The income exclusion is $104,000
  • The housing costs limitation is calculated by subtracting 16% of the income limit ($16,656) from 30% of the income limit ($31,230)
  • This results in a limit of $14,574, which clearly is inadequate for housing in many, if not most, foreign locations.  Fortunately, the law allows the IRS to compute and publish higher limitations for specific locations, and the IRS has done so annually since 2006

The Notice provides a lengthy list of housing amounts that may be used in lieu of 30% of $104,000 in computing the limit. As usual, the highest cost locations are Hong Kong ($114,300) and Moscow ($108,000). Other very high cost places are Bermuda ($90,000), Tokyo ($89,000), Singapore ($80,500), Paris ($73,600), and London ($72,600). These amounts are very beneficial. For example, an employee can exclude up to $55,944 of London housing costs, as opposed to the $14,574 which would be allowed without the higher IRS numbers in the Notice.

Taxpayers are allowed to elect to use these numbers for the 2017 tax year. Since the costs ordinarily increase from year-to-year, most taxpayers will benefit from this option.

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