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

use Form 2555 – EZ to claim the housing exclu-

Example. Tom and Jane live together and

1) Your foreign earned income exclusion,

sion.

file a joint return. Tom was a bona fide resident

plus

of and had his tax home in Ghana from August

Your housing exclusion is the lesser of:

17, 2001, through December 31, 2002. Jane

2) Your housing exclusion.

•

That part of your housing amount paid for

was a bona fide resident of and had her tax

with employer-provided amounts, or

home in Ghana from September 15, 2001,

Carryover. You can carry over to the next

•

through December 31, 2002.

Your foreign earned income.

year any part of your housing deduction that is

During 2001, Tom received $75,000 of for-

If you choose the housing exclusion, you must

not allowed because of the limit. You are al-

eign earned income and Jane received $50,000

figure it before figuring your foreign earned in-

lowed to carry over your excess housing deduc-

of foreign earned income. Tom paid $10,000 for

come exclusion. You cannot claim less than the

tion to the next year only. If you cannot deduct it

housing expenses, of which $7,500 was for ex-

full amount of the housing exclusion to which

in the next year, you cannot carry it over to any

penses incurred from September 15 through the

you are entitled.

other year. You deduct the carryover in figuring

end of the year. Jane paid $3,000 for housing

adjusted gross income. The amount of carryover

expenses in 2001, all of which were incurred

Foreign tax credit. If you claim either

you can deduct is limited to your foreign earned

during her period of residence in Ghana.

the foreign earned income exclusion or

income for the year of the carryover minus the

Tom and Jane can choose to figure their

the foreign housing exclusion, you can-

CAUTION

total of your foreign earned income exclusion,

housing amount jointly. If they do so, and Tom

not take a foreign tax credit for taxes on income

housing exclusion, and housing deduction for

claims the housing exclusion, their housing ex-

you can exclude. If you do take a credit for any of

that year.

penses would be $13,000 and their base

these taxes, one or both of the exclusions may

amount, using Tom’s period of residence (Aug.

17 — Dec. 31, 2001), would be $3,962 ($28.92 ×

be considered revoked. See Credit for Foreign

Married Couples

Income Taxes in chapter 5 for more information

137 days). Tom’s housing amount would be

Living Apart

about the foreign tax credit.

$9,038 ($13,000 – $3,962). If, instead, Jane

claims the housing exclusion, their housing ex-

If you and your spouse live apart and maintain

penses would be limited to $10,500 ($7,500 +

Foreign Housing Deduction

separate households, you both may be able to

$3,000) and their base amount, using Jane’s

claim the foreign housing exclusion or the for-

period of residence (Sept. 15 — Dec. 31, 2001),

If you do not have self-employment income, you

eign housing deduction. You can do this if both

would be $3,123 ($28.92 × 108 days). Jane’s

cannot take a foreign housing deduction.

of the following conditions are met.

housing amount would be $7,377 ($10,500 –

How you figure your housing deduction de-

•

You and your spouse have different tax

$3,123).

pends on whether you have only self-employ-

homes that are not within reasonable com-

If Tom and Jane choose to figure their hous-

ment income or both self-employment income

muting distance of each other.

ing amounts separately, then Tom’s separate

and employer-provided income. In either case,

base amount would be $3,962 and Jane’s sepa-

•

the amount you can deduct is subject to the limit

Neither spouse’s residence is within rea-

rate base amount would be $3,123. They could

explained below.

sonable commuting distance of the other

divide their total $13,000 housing expenses be-

spouse’s tax home. Otherwise, only one of

tween them in any proportion they wished.

Self-employed — no employer-provided

you can claim a foreign housing exclusion

amounts. If none of your housing amount is

or deduction.

Housing exclusion. Each spouse claiming a

considered paid for with employer-provided

housing exclusion must figure separately the

amounts, such as when all of your income is

part of the housing amount that is attributable to

If you both claim a foreign housing ex-

from self-employment, you can deduct your

TIP

employer-provided amounts, based on his or

clusion or a foreign housing deduction,

housing amount, subject to the limit below, in

her separate foreign earned income.

neither of you can claim the expenses

figuring your adjusted gross income.

for a qualified second foreign household main-

Take the deduction by including it in the total

tained for the other. If one of you qualifies for but

on line 32 of Form 1040. Enter the amount to the

does not claim the exclusion or the deduction,

left of line 32 and write “Form 2555” on the

Form 2555 and

the other spouse can claim the expenses for a

dotted line.

qualified second household maintained for the

Form 2555–EZ

first spouse. This would usually result in a larger

Self-employed and employer-provided

total foreign housing exclusion or deduction

amounts. If you are both an employee and a

You can use Form 2555 to claim the foreign

since you would apply only one base amount

self-employed individual during the year, you

earned income exclusion. You must use it to

against the combined housing expenses.

can deduct part of your housing amount and

claim the foreign housing exclusion or deduc-

exclude part of it. To find the part that you can

If you and your spouse live together, both of

tion. In some circumstances you can use Form

take as a housing exclusion, multiply your hous-

you claim a foreign housing exclusion or a for-

2555 – EZ to claim the foreign earned income

ing amount by the employer-provided amounts

eign housing deduction, and you file a joint re-

exclusion.

(discussed earlier) and then divide the result by

turn, you can figure your housing amounts either

You must attach Form 2555

to your Form

your foreign earned income. The balance of the

separately or jointly. If you file separate returns,

1040 or 1040X if you claim the foreign housing

housing amount can be deducted, subject to the

you must figure your housing amounts sepa-

exclusion or the foreign housing deduction. If

limit below.

rately. In figuring your housing amounts sepa-

you cannot use Form 2555 – EZ, you must at-

rately, you can allocate your housing expenses

tach Form 2555 if you claim the foreign earned

Example. Your housing amount for the year

between yourselves in any proportion you wish,

income exclusion. Form 2555 shows how you

is $12,000. During the year, your total foreign

but each spouse must use his or her full base

qualify for the bona fide residence test or physi-

earned income is $80,000, of which half

amount.

cal presence test, how much of your earned

($40,000) is from self-employment and half is

In figuring your housing amount jointly, you

income is excluded, and how to figure the

from your services as an employee. Half of your

can combine your housing expenses and figure

amount of your allowable housing exclusion or

housing amount ($12,000/2) is considered pro-

one base amount. If you figure your housing

deduction. Do not submit Form 2555 or Form

vided by your employer. You can exclude

amount jointly, only one spouse can claim the

2555 – EZ by itself. See the instructions for the

$6,000 as a housing exclusion. You can deduct

housing exclusion or housing deduction. Either

forms if you are not sure about the information

the remaining $6,000 as a housing deduction

spouse can claim the exclusion or deduction.

requested.

subject to the following limit.

However, if you and your spouse have different

Form 2555–EZ

periods of residence or presence and the one

with the shorter period of residence or presence

Limit

claims the exclusion or deduction, you can claim

Form 2555 – EZ has fewer lines than Form 2555.

Your housing deduction cannot be more than

as housing expenses only the expenses for that

You can use this form if all seven of the following

your foreign earned income minus the total of:

shorter period.

apply.

Chapter 4 Foreign Earned Income and Housing: Exclusion – Deduction

Page 21

Publication 54 - Tax Guide For U.s. Citizens And U.s. Citizens Abroad - 2001 Page 21

Related Articles

Related forms

Related Categories