Publication 54 - Tax Guide For U.s. Citizens And U.s. Citizens Abroad

U.S. Government Civilian Employees Stationed

They are considered provided for your

Limit on Excludable Amount

Abroad, for more information.

employer’s convenience if there is a good busi-

ness reason for providing them, other than to

You may be able to exclude up to $78,000 of

American Institute in Taiwan. Amounts paid

give you more pay.

income earned in 2001. The table below shows

by the American Institute in Taiwan are not for-

If the conditions listed earlier are met (includ-

the maximum amount excludable for other

eign earned income for purposes of the foreign

ing the convenience of employer condition), do

years.

earned income exclusion, the foreign housing

not include the value of the meals or lodging in

exclusion, or the foreign housing deduction. If

Year

Maximum

your income, even in the following situations.

you are an employee of the American Institute in

Excludable Amount

Taiwan, allowances you receive are exempt

1997 and earlier

$70,000

1) Your employer intends them as part of

1998

$72,000

from U.S. tax up to the amount that equals

your pay.

1999

$74,000

tax-exempt allowances received by civilian em-

2000

$76,000

2) A law or your employment contract says

ployees of the U.S. Government.

2001

$78,000

that they are provided as compensation.

2002 and later

$80,000

Allowances. Cost-of-living and foreign-area

On the other hand, if your employer provides

allowances paid under certain Acts of Congress

For 2001, you cannot exclude more than the

meals or lodging to you or your family as a

to U.S. civilian officers and employees stationed

smaller of:

means of giving you more pay, and there is no

in Alaska and Hawaii or elsewhere outside the

other business reason for providing them, their

1) $78,000, or

48 contiguous states and the District of Colum-

value is extra income to you because they are

bia can be excluded from gross income. Post

2) Your foreign earned income (discussed

not furnished for the convenience of your em-

differentials are wages that must be included in

earlier) for the tax year minus your foreign

ployer.

gross income, regardless of the Act of Congress

housing exclusion (discussed later).

under which they are paid.

Condition of employment. Lodging is pro-

If both you and your spouse work abroad and

vided as a condition of employment if you must

More information. Publication 516 has more

you and your spouse meet either the bona fide

accept the lodging to properly carry out the du-

information for U.S. Government employees

residence test or the physical presence test, you

ties of your job. You must accept lodging to

abroad.

can each choose the foreign earned income

properly carry out your duties if, for example,

exclusion. You do not both need to meet the

you must be available for duty at all times.

same test. Together, you and your spouse can

Exclusion of

Foreign camps. If the lodging is in a camp

exclude as much as $156,000.

Meals and Lodging

located in a foreign country, the camp is consid-

Paid in year following work. Generally, you

ered part of your employer’s business premises.

You do not include in your income the value of

are considered to have earned income in the

A camp is lodging that is:

meals and lodging provided to you and your

year in which you do the work for which you

family by your employer at no charge if the

receive the income, even if you work in one year

1) Provided for your employer’s convenience

following conditions are met.

but are not paid until the following year. If you

because the place where you work is in a

report your income on a cash basis, you report

remote area where satisfactory housing is

1) The meals are furnished:

the income on your return for the year you re-

not available to you on the open market

ceive it. If you work one year, but are not paid for

within a reasonable commuting distance,

a) On the business premises of your em-

that work until the next year, the amount you can

ployer, and

2) Located as close as reasonably possible in

exclude in the year you are paid is the amount

the area where you work, and

b) For the convenience of your employer.

you could have excluded in the year you did the

3) Provided in a common area or enclave

work if you had been paid in that year. For an

2) The lodging is furnished:

that is not available to the general public

exception to this general rule, see Year-end

for lodging or accommodations and that

payroll period, later.

a) On the business premises of your em-

normally houses at least ten employees.

ployer,

Example. You qualify as a bona fide resi-

dent of Brazil for all of 2000 and 2001. You

b) For the convenience of your employer,

report your income on the cash basis. In 2000,

and

you were paid $65,000 for work you did in Brazil

Foreign Earned

c) As a condition of your employment.

during that year. You excluded all of the $65,000

from your income in 2000.

Income Exclusion

The terms used in this list are explained later.

In 2001, you were paid $91,000 for your work

Amounts you do not include in income be-

in Brazil. $12,000 was for work you did in 2000

cause of these rules are not foreign earned

If your tax home is in a foreign country and you

and $79,000 was for work you did in 2001. You

income.

meet the bona fide residence test or the physical

can exclude $11,000 of the $12,000 from your

presence test, you can choose to exclude from

income in 2001. This is the $76,000 maximum

Family. Your family, for this purpose, includes

your income a limited amount of your foreign

exclusion allowable in 2000 minus the $65,000

only your spouse and your dependents.

earned income. Foreign earned income is de-

you actually excluded that year. You must in-

Lodging. The value of lodging includes the

fined earlier.

clude the remaining $1,000 in income in 2001

cost of heat, electricity, gas, water, sewer ser-

You can also choose to exclude from your

because you could not have excluded that in-

vice, and similar items needed to make the lodg-

income a foreign housing amount. This is ex-

come in 2000 if you had received it that year.

ing fit to live in.

plained later under Foreign Housing Exclusion.

You can exclude $78,000 of the $79,000 you

If you choose to exclude a foreign housing

were paid for work you did in 2001 from your

Business premises of employer. Generally,

amount, you must figure the foreign housing

2001 income.

the business premises of your employer is wher-

exclusion before you figure the foreign earned

Your total foreign earned income exclusion

ever you work. For example, if you work as a

income exclusion. Your foreign earned income

for 2001 is $89,000 ($11,000 of the pay received

housekeeper, meals and lodging provided in

exclusion is limited to your foreign earned in-

in 2001 for work you did in 2000 and $78,000 of

your employer’s home are provided on the busi-

come minus your foreign housing exclusion.

the pay you received in 2001 for work you did in

ness premises of your employer. Similarly,

If you choose to exclude foreign earned in-

2001). You would include in your 2001 income

meals provided to cowhands while herding cat-

come, you cannot deduct, exclude, or claim a

$2,000 of the pay you received in 2001 ($1,000

tle on land leased or owned by their employer

credit for any item that can be allocated to or

of the pay received in 2001 for the work you did

are considered provided on the premises of their

charged against the excluded amounts. This

in 2000 and $1,000 of the pay received in 2001

employer.

includes any expenses, losses, and other nor-

for the work you did in 2001).

Convenience of employer. Whether meals

mally deductible items allocable to the excluded

or lodging are provided for your employer’s con-

income. For more information about deductions

Year-end payroll period. There is an excep-

venience must be determined from all the facts.

and credits, see chapter 5.

tion to the general rule that income is considered

Page 18

Chapter 4 Foreign Earned Income and Housing: Exclusion – Deduction

Publication 54 - Tax Guide For U.s. Citizens And U.s. Citizens Abroad - 2001 Page 18

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