Publication 54 - Tax Guide For U.s. Citizens And Resident Aliens Abroad - 2006 Page 20
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44•
Revoking the Exclusion
A timely-filed return (including any exten-
by the number of days in your qualifying period
that fall within your tax year.
sions),
You can revoke your choice for any year. You do
For 2006, the maximum foreign earned in-
•
A return amending a timely-filed return, or
this by attaching a statement that you are revok-
come exclusion is $82,400 per year; 16% of this
•
ing one or more previously made choices to the
amount is $13,184, or $36.12 per day. To figure
A return filed within 1 year from the origi-
return or amended return for the first year that
your base housing amount if you are a calen-
nal due date of the return (determined
you do not wish to claim the exclusion(s). You
dar-year taxpayer, multiply $36.12 by the num-
without regard to any extensions).
must specify which choice(s) you are revoking.
ber of your qualifying days during 2006. (See
You must revoke separately a choice to exclude
Part-year exclusion under Limit on Excludable
You can choose the exclusion on a return filed
foreign earned income and a choice to exclude
Amount, earlier.) Subtract the result from your
after the periods described above if you owe no
foreign housing amounts.
total housing expenses (up to the applicable
federal income tax after taking into account the
If you revoked a choice and within 5 years
limit) to find your housing amount.
exclusion.
again wish to choose the same exclusion, you
If you owe federal income tax after taking
must apply for IRS approval. You do this by
Example. You qualify under the physical
into account the exclusion, you can choose the
requesting a ruling from the IRS.
presence test for all of 2006. During the year,
exclusion on a return filed after the periods de-
you spent $14,000 for your housing. This is
Mail your request for a ruling, in dupli-
scribed above if you file before IRS discovers
below the limit for the location in which you
cate, to:
that you failed to choose the exclusion. You
incurred the expenses.Your housing amount is
must type or legibly print at the top of the first
$14,000 minus $13,184, or $816.
page of the Form 1040 “Filed pursuant to section
Associate Chief Counsel (International)
1.911-7(a)(2)(i)(D).”
U.S. Government allowance. You must re-
Internal Revenue Service
duce your housing amount by any U.S. Govern-
If you owe federal income tax after taking into
Attn: CC:PA:T
ment allowance or similar nontaxable allowance
account the foreign earned income exclusion
P.O. Box 7604
intended to compensate you or your spouse for
and the IRS discovered that you failed to choose
Ben Franklin Station
the expenses of housing during the period for
the exclusion, you may still be able to choose
Washington, DC 20044
which you claim a foreign housing exclusion or
the exclusion. You must request a private letter
deduction.
Because requesting a ruling can be complex,
ruling under Income Tax Regulation 301.9100-3
you may need professional help. Also, the IRS
and Revenue Procedure 2006-1.
Housing expenses. Housing expenses in-
charges a fee for issuing these rulings. For more
Revenue procedures are published in the
clude your reasonable expenses paid or in-
information, see Revenue Procedure 2006-1,
curred for housing in a foreign country for you
Internal Revenue Bulletin (I.R.B.) and in the Cu-
which is published in Internal Revenue Bulletin
and (if they live with you) for your spouse and
mulative Bulletin (C.B.), which are volumes con-
No. 2006-1.
dependents.
taining official matters of the Internal Revenue
In deciding whether to give approval, the IRS will
Consider only housing expenses for the part
Service. The I.R.B. is available on the Internet at
consider any facts and circumstances that may
of the year that you qualify for the foreign earned
You can buy the C.B. containing a
be relevant. These may include a period of resi-
income exclusion.
particular revenue procedure from the Govern-
dence in the United States, a move from one
Housing expenses include:
ment Printing Office (online at
foreign country to another foreign country with
•
gpo.gov or call 1-866-512-1800).
Rent,
different tax rates, a substantial change in the
•
tax laws of the foreign country of residence or
The fair rental value of housing provided in
physical presence, and a change of employer.
kind by your employer,
Effect of Choosing the Exclusion
•
Repairs,
Once you choose to exclude your foreign
•
Utilities (other than telephone charges),
earned income, that choice remains in effect for
Foreign Housing
that year and all later years unless you revoke it.
•
Real and personal property insurance,
Exclusion and
•
Nondeductible occupancy taxes,
Foreign tax credit or deduction. Once you
•
Deduction
Nonrefundable fees for securing a lease-
choose to exclude foreign earned income, you
hold,
cannot take a foreign tax credit or deduction for
•
taxes on income you can exclude. If you do take
In addition to the foreign earned income exclu-
Rental of furniture and accessories, and
a credit or deduction for any of those taxes, your
sion, you can also claim an exclusion or a de-
•
Residential parking.
choice to exclude foreign earned income may be
duction from gross income for your housing
considered revoked. See Publication 514 for
amount if your tax home is in a foreign country
Housing expenses do not include:
more information.
and you qualify under either the bona fide resi-
•
dence test or the physical presence test.
Expenses that are lavish or extravagant
The housing exclusion applies only to
under the circumstances,
Earned income credit. If you claim the for-
amounts considered paid for with employer-
•
eign earned income exclusion, you will not qual-
Deductible interest and taxes (including
provided amounts. The housing deduction ap-
ify for the earned income credit for the year. For
deductible interest and taxes of a ten-
plies only to amounts paid for with
ant-stockholder in a cooperative housing
more information on this credit, see Publication
self-employment earnings.
corporation),
596.
If you are married and you and your spouse
•
each qualifies under one of the tests, see Mar-
The cost of buying property, including prin-
ried Couples, later.
cipal payments on a mortgage,
Figuring tax on income not excluded. If you
claim the foreign earned income exclusion, the
•
The cost of domestic labor (maids, gar-
Housing Amount
housing exclusion (discussed later), or both, you
deners, etc.),
must figure the tax on your nonexcluded income
•
Your housing amount is the total of your housing
Pay television subscriptions,
using the tax rates that would have applied had
expenses for the year minus the base housing
•
you not claimed the exclusions. See the instruc-
Improvements and other expenses that in-
amount.
tions for Form 1040 and complete the Foreign
crease the value or appreciably prolong
Earned Income Tax Worksheet to figure the
Base housing amount. The computation of
the life of property,
amount of tax to enter on Form 1040, line 44. If
the base housing amount (line 32 of Form 2555)
•
Purchased furniture or accessories, or
you must attach Form 6251 to your return, use
is tied to the maximum foreign earned income
•
the Foreign Earned Income Tax Worksheet pro-
exclusion. The amount is 16% of the exclusion
Depreciation or amortization of property or
vided in the instructions for Form 6251.
amount (computed on a daily basis), multiplied
improvements.
Page 20
Chapter 4 Foreign Earned Income and Housing: Exclusion – Deduction
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