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

Ines Zemelman, EAMar-10-2017

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.

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

 

sss
Ines Zemelman, EA
founder of Taxes for Expats
She may be reached at: