Publication 54 - Tax Guide For U.s. Citizens And Resident Aliens Abroad - 2006 Page 23
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44their foreign earned income and housing exclu-
expenses. He puts a base housing amount of
However, the Adamses are still entitled to the full
sions.
$13,184 on line 32 and subtracts that amount to
standard deduction for a married couple filing
arrive at a total foreign housing amount of
jointly.
Jim’s Form 2555. On Jim’s Form 2555, Part
$11,536 on line 33. He figures a housing exclu-
IV, he lists his salary on line 19, his housing
sion of $11,536 on line 36.
allowance on line 22e, and the fair market value
Judy’s Form 2555-EZ. Judy completes a
Jim figures his foreign earned income exclu-
of meals and lodging provided in camps by his
Form 2555-EZ to figure her foreign earned in-
sion in Part VII of Form 2555. Because his for-
employer on lines 21a and 21b. The entries on
come exclusion. Her foreign earned income is
eign earned income ($89,000) is more than the
lines 21a and 21b are not shown as income on
less than the maximum excludable amount. On
maximum exclusion of $82,400, he must reduce
Form 1040. Jim enters the total of these two
Judy’s Form 2555-EZ, Part IV, she lists her
the income by the housing exclusion. The for-
entries on line 25 of Form 2555.
salary on line 17. She figures an exclusion of
eign earned income exclusion on line 42 is
Jim combines his housing expenses,
$44,000 on line 18.
$77,464 ($89,000 – $11,536).
$18,000, with the qualified expenses for the sec-
The Adamses enter their combined exclu-
When Jim combines this exclusion of
ond household, $12,000, and enters total hous-
$77,464 with his housing exclusion of $11,536,
sions of $133,000 on line 21, Form 1040. They
ing expenses of $30,000 on line 28. His limit on
he comes up with a total exclusion of $89,000 in
identify this item to the left of the entry space.
housing expenses is $24,720 (30% of $82,400)
Part VIII.
because his qualifying period includes all of
Their adjusted gross income on line 37 is $7,500
2006 and the expenses were not incurred in
The Adamses cannot deduct any of Jim’s
(their investment income), which does not qual-
high-cost localities. Jim enters $24,720 on lines
unreimbursed employee business expenses be-
ify for exclusion.
29b and 30. This is the limit on his housing
cause they are all allocable to excluded income.
Chapter 4 Foreign Earned Income and Housing: Exclusion – Deduction
Page 23
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