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In this section we try to help the Expatriate understand what expenses, that are paid by employers. We have included some items that can be deducted on an Expatriate return, that can not be deducted on resident returns. This list is not inclusive of all compensation plans in place. This page will be updated as we get your ideas and check the tax law. The FileTax Organizer has special section for Expats.
FOREIGN HOUSING AMOUNT
If your tax home is in a foreign country and you meet either the bona fide residence test or the physical presence test, you may be able to claim an exclusion or a deduction from gross income for a housing amount paid to you. Housing amount is the
excess, if any, of your allowable housing expenses for the tax year over a base amount. Allowable housing expenses are the reasonable expenses (such as rent, utilities other than telephone charges, and real and personal property insurance) paid or incurred during the tax year by you, or on your behalf, for your foreign housing and that of your spouse and dependents if they lived with you. You can include the rental value of housing provided by your employer in return for your services. You can also include the allowable housing expenses of a second foreign household for your spouse and dependents if they did not live with you because of dangerous, unhealthy, or otherwise adverse living conditions at your tax home. Housing expenses, for this purpose, do not include the cost of home purchase or other capital items, wages of domestic servants, or deductible interest and taxes.
The base amount for 1995 is $9,060 or $24.82 per day. To figure your base amount if you are a calendar year taxpayer, multiply $24.82 by the number of days in your period of foreign residence or presence, whichever applies, that are within the tax year.
You can exclude your housing amount from income to the extent it is from employer-provided amounts. Employer-provided amounts are any amounts paid to or for you by your employer, including your salary, housing reimbursements, and the fair market value of pay given in the form of goods and services.
If you claim the exclusion, you cannot claim any credits or deductions related to excluded income, including a credit or deduction for any foreign income tax paid on the excluded income.
If you are self-employed and your housing amount is not provided by or for an employer, you can deduct it in arriving at your adjusted gross income. However, the deduction is limited to the amount your foreign earned income for the tax year is more than the excluded foreign earned income and housing amount.
FOREIGN HOUSING CARRYOVER
If you cannot deduct all of your housing amount in a tax year because of the limit, you can carry over the unused part to the next year. You can deduct this carryover to the extent the limit for that year (your foreign earned income minus the foreign earned income and housing amount you exclude) is more than your housing deduction for that year. You cannot carry over any remaining amount to any future tax year.
Choosing the exclusion(s). You make separate choices to exclude foreign earned income and/or to exclude or deduct your foreign housing amount. If you choose to take both the foreign housing exclusion and the foreign earned income exclusion, you must figure your foreign housing exclusion first. Your foreign earned income exclusion is then limited to the smaller of (a) your annual exclusion limit or (b) the excess of your foreign earned income over your foreign housing exclusion.
Once you choose to exclude your foreign earned income or housing amount, that choice remains in effect for that year and all future years unless you revoke it. You can revoke your choice for any tax year. However, if you revoke your choice for a tax year, you cannot claim the exclusion again for your next 5 tax years without the approval of the IRS.
Exclusion of employer-provided meals and lodging. If as a condition of employment you are required to live in a camp in a foreign country that is provided by or for your employer, you can exclude the value of any meals and lodging furnished to you, your spouse, and your dependents. For this exclusion, a camp is lodging that is:
1) Provided for your employer's convenience because the place where you work is in a remote area where satisfactory housing is not available to you on the open market within a reasonable commuting distance,
2) Located as close as practicable in the area where you work, and
3) Provided in a common area or enclave that is not available to the public for lodging or accommodations and that normally houses at least 10 employees.
Topics for: home leave, children's education, moving expenses, supplementary medical payment are still under construction.
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