Irs Publication 54 - Tax Guide For U.s. Citizens And Resident Aliens Abroad - 2008 Page 23
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44Jim is a petroleum engineer. For 2008, his
a qualified second foreign household. They in-
high-cost localities. Jim enters $26,280 on lines
salary, which was entirely from foreign sources
clude the $12,000 Country Y housing expenses
29b and 30. This is the limit on his housing
was $74,000. In addition, his employer provided
with Jim’s $18,000 Country X housing ex-
expenses. He puts a base housing amount of
him an annual housing allowance of $18,000,
penses. This results in a larger total housing
$14,016 on line 32 and subtracts that amount to
which he used to maintain a rented apartment at
exclusion.
arrive at a total foreign housing amount of
his tax home in City A, Country X (which is not a
$12,264 on line 33. He figures a housing exclu-
Jim and Judy had taxable U.S. interest in-
high-cost locality), for the period he was not
sion of $12,264 on line 36.
come of $7,500 for the year. The Adamses had
working at remote drilling sites.
Jim figures his foreign earned income exclu-
no other income for the year and do not itemize
At various times during the year, Jim worked
sion in Part VII of Form 2555. Because his for-
deductions.
at remote oil drilling sites. While he worked at
eign earned income ($92,000) is more than the
The Adamses report their income and figure
these remote sites, his employer provided him
maximum exclusion of $87,600, he must reduce
their foreign earned income exclusions and for-
lodging and meals at nearby camps. Satisfac-
the income by the housing exclusion. The for-
eign housing exclusion, as shown on the accom-
tory housing was not available on the open mar-
eign earned income exclusion on line 42 is
panying filled-in forms.
ket near these drilling sites, and the lodging was
$79,736 ($92,000 – $12,264).
First, they list their income on the front of
provided in common areas that normally accom-
When Jim combines this exclusion of
Form 1040. Their combined salaries, including
modated 10 or more employees and were not
$79,736 with his housing exclusion of $12,264
Jim’s $18,000 housing allowance, total
available to the general public. The fair market
he comes up with a total exclusion of $92,000 in
$139,000. They enter this on line 7. They enter
value of the lodging he was provided in these
Part VIII.
their interest income of $7,500 on line 8a.
camps was $2,000, and the value of the meals
The Adamses cannot deduct any of Jim’s
At this point, Jim will complete Form 2555
was $1,000.
unreimbursed employee business expenses be-
and Judy will complete Form 2555-EZ to figure
After he made an adequate accounting, Jim
cause they are all allocable to excluded income.
their foreign earned income and housing exclu-
was reimbursed by his employer for part of his
However, the Adamses are still entitled to the full
sions.
travel expenses and other employee business
standard deduction for a married couple filing
expenses. Jim had $2,500 of unreimbursed em-
jointly.
Jim’s Form 2555. On Jim’s Form 2555, Part
ployee business expenses for travel, meals, and
IV, he lists his salary on line 19, his housing
lodging that were allocable to his foreign earned
Judy’s Form 2555-EZ. Judy completes a
allowance on line 22e, and the fair market value
income.
Form 2555-EZ to figure her foreign earned in-
of meals and lodging provided in camps by his
Because of adverse conditions in Country X,
come exclusion. Her foreign earned income is
employer on lines 21a and 21b. The entries on
Judy and the children lived in City Y, Country Y
less than the maximum excludable amount. On
lines 21a and 21b are not shown as income on
(which is not a high-cost locality), where she
Judy’s Form 2555-EZ, Part IV, she lists her
Form 1040. Jim enters the total of these two
worked as an executive secretary with a U.S.
salary on line 17. She figures an exclusion of
entries on line 25 of Form 2555.
company. Her earnings from this job were
$47,000 on line 18.
$47,000. These earnings were subject to foreign
Jim combines his housing expenses,
The Adamses enter their combined exclu-
income tax.
$18,000, with the qualified expenses for the sec-
sions of $139,000 on line 21, Form 1040. They
ond household, $12,000, and enters total hous-
The Adams family rented an apartment in
identify this item to the left of the entry space.
ing expenses of $30,000 on line 28. His limit on
Country Y for Judy and the children. They paid
Their adjusted gross income on line 37 is $7,500
housing expenses is $26,280 (30% of $87,600)
$1,000 a month rent, including utilities, or
(their investment income), which does not qual-
because his qualifying period includes all of
$12,000 for the year. The Adamses choose to
ify for exclusion.
2008 and the expenses were not incurred in
treat the expenses for the apartment as those for
Chapter 4 Foreign Earned Income and Housing: Exclusion – Deduction
Page 23
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