Foreign rental income and housing expenses

Yes — foreign rental property follows the same deduction rules as a US rental, reported on Schedule E: mortgage interest, property taxes, insurance, management fees, advertising, minor repairs, and depreciation are all deductible against the rental income. If your rental produces a loss, the usual passive activity loss limitations apply regardless of where the property sits — up to $25,000 of loss may be currently deductible if you actively participate and your income is under the phase-out range, with any disallowed loss carried forward. See the full foreign rental income tax guide for how to report the property and its expenses correctly.

Foreign residential rental property is depreciated over 30 years using the straight-line Alternative Depreciation System (ADS) for property placed in service after December 31, 2017 — noticeably slower than the 27.5-year schedule used for US residential rentals. Property placed in service before 2018 uses a 40-year ADS schedule instead. The accelerated GDS method available for US rentals isn't an option for foreign property, so on identical numbers, a foreign rental generates a smaller annual depreciation deduction than a comparable US property would. See the full foreign rental property depreciation rules for how to calculate your basis and annual deduction.

Yes — US citizens and green card holders owe US tax on rental income from foreign property just as they would on a US rental, reported on Schedule E regardless of where the property is located. If you also pay tax on that rental income to the country where the property sits, the Foreign Tax Credit (in the passive income category) is usually the right tool to prevent being taxed twice on the same rental profit. See the full foreign rental income tax guide for how reporting and double-tax relief work together.

No — rental income is passive income, and the Foreign Earned Income Exclusion only applies to earned income like wages and self-employment earnings, so a foreign rental can't be excluded this way no matter how long you've lived abroad. The Foreign Tax Credit is the relevant relief tool for rental income instead — and it's worth remembering that mixing income types matters here: even if your salary is fully excluded under the FEIE, your rental profit sits in a completely separate bucket and gets taxed (and relieved) on its own terms.

The Foreign Housing Exclusion lets qualifying expats exclude (or, if self-employed, deduct) reasonable housing costs abroad above a base amount, on top of whatever they exclude under the FEIE. It's calculated on the same Form 2555 as the FEIE but isn't part of the FEIE's dollar cap — it's a separate benefit aimed specifically at the extra cost of housing overseas. For 2025, the base amount is $20,800, with a standard ceiling around $39,000 that rises significantly in higher-cost cities.

You need to qualify for the FEIE in the first place — same bona fide residence or physical presence test, same foreign tax home — and have qualifying housing expenses above the base amount, funded by earned income. Because eligibility rides on the same tests as the FEIE, anyone who doesn't pass the residency requirement for the FEIE also can't claim the housing exclusion, regardless of how much they're actually paying for housing abroad. It's a genuinely separate calculation from the FEIE dollar limit, but the underlying eligibility gate is shared.

No — the FEIE and the Foreign Housing Exclusion are two separate provisions that happen to be calculated together on the same form. The FEIE excludes up to a set dollar amount of your earned income ($130,000 for 2025); the housing exclusion is calculated separately, on top of that, for qualifying housing costs above the base amount. You can claim both together, but the housing exclusion isn't baked into the FEIE's limit — it's additional relief, not a subset of it.

Only one spouse can claim the exclusion or deduction for the same shared household's housing expenses — you can't split the same costs between both returns, even on a joint return. If both spouses have their own foreign earned income and live together, you can figure the housing amount jointly or have whichever spouse makes more sense claim it, but the actual expenses can't be double-counted across both. Working through the housing exclusion calculation together before filing helps avoid claiming the same rent or utility bill twice by mistake.

Qualifying housing expenses include rent, utilities other than phone service, renter's or property insurance, nonrefundable lease fees, furniture rental, residential parking, and minor repairs needed to keep the place habitable. What doesn't count is just as important: buying or improving property, mortgage interest or principal, depreciation on property you own, purchased (rather than rented) furniture, domestic help, groceries, TV subscriptions, and anything considered lavish or extravagant. See the full list of qualifying and non-qualifying expenses before assuming a particular cost is covered.