Publication 54 - Tax Guide For U.s. Citizens And U.s. Citizens Abroad - 2001 Page 22
ADVERTISEMENT
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44salary, which was entirely from foreign sources,
Jim’s Form 2555. On Jim’s Form 2555, Part
1) You are a U.S. citizen or a resident alien.
amounted to $71,000. In addition, his employer
IV, he lists his salary on line 19, his housing
provided him an annual housing allowance of
allowance on line 22e, and the fair market value
2) Your total foreign earned income for the
$18,000, which he used to maintain a rented
of meals and lodging provided in camps by his
year is $78,000 or less.
apartment at his tax home in Country X for the
employer on lines 21a and 21b. The entries on
3) You have earned wages/salaries in a for-
period he was not working at remote drilling
lines 21a and 21b are not shown as income on
eign country.
sites.
Form 1040. Jim enters the total of these two
At various times during the year, Jim worked
4) You are filing a calendar year return that
entries on line 25 of Form 2555.
at remote oil drilling sites in nearby countries.
covers a 12-month period.
Jim combines his housing expenses,
While he worked at these remote sites, his em-
$18,000, with the qualified expenses for the sec-
5) You did not have any self-employment in-
ployer provided him lodging and meals at
ond household, $12,000, and enters total hous-
come for the year.
nearby camps. Satisfactory housing was not
ing expenses of $30,000 on line 28. He puts a
available on the open market near these drilling
6) You did not have any business or moving
base amount of $10,557 on line 30 and sub-
sites, and the lodging was provided in common
expenses for the year.
tracts that amount to arrive at a total foreign
areas that normally accommodated 10 or more
7) You are not claiming the foreign housing
housing amount of $19,443 on line 31. He
employees and were not available to the general
exclusion or deduction.
figures a housing exclusion of $19,443 on line
public. The fair market value of the lodging he
34.
was provided in these camps was $2,000, and
the value of the meals was $1,000.
Form 2555
Although Judy could claim a separate
After he made an adequate accounting, Jim
TIP
housing exclusion for the expenses of
was reimbursed by his employer for part of his
If you claim exclusion under the bona fide resi-
the Paris apartment rather than com-
travel expenses and other employee business
dence test, you should fill out Parts I, II, IV, and V
bining those expenses with Jim’s housing ex-
expenses. Jim had $2,500 of unreimbursed em-
of Form 2555. In filling out Part II, be sure to give
penses, she does not do so because she would
ployee business expenses for travel, meals, and
your visa type and the period of your bona fide
have to reduce her expenses by a separate
lodging that were allocable to his foreign earned
residence. Frequently, these items are over-
base housing amount. Also, her foreign earned
income.
looked.
income is less than the maximum foreign earned
Because of adverse conditions in Country X,
If you claim exclusion under the physical
income exclusion, so claiming a separate hous-
Judy and the children lived in Paris, France,
presence test, you should fill out Parts I, III, IV,
ing exclusion would not result in any tax benefit.
while Jim worked in the Middle East. Judy had a
and V of Form 2555. When filling out Part III, be
Jim figures his foreign earned income exclu-
job as an executive secretary with a U.S. com-
sure to insert the beginning and ending dates of
sion in Part VII of Form 2555. Because his for-
pany in Paris. Her earnings from this job were
your 12-month period and the dates of your
eign earned income is more than the maximum
$44,000. These earnings were subject to French
arrivals and departures, as requested in the
exclusion of $78,000, he must reduce the in-
income tax.
travel schedule.
come by the housing exclusion The foreign
The Adams family rented an apartment in
You must fill out Part VI if you are claiming a
earned income exclusion on line 40 is $69,557
Paris during 2001 for Judy and the children.
foreign housing exclusion or deduction.
($89,000 – $19,443).
They paid $1,000 a month rent, including utili-
Fill out Part IX if you are claiming the foreign
ties, or $12,000 for the year. The Adamses
housing deduction.
When Jim combines this exclusion of
choose to treat the expenses for the Paris apart-
If you are claiming the foreign earned income
$69,557 with his housing exclusion of $19,443
ment as those for a qualified second foreign
exclusion, fill out Part VII.
he comes up with a total exclusion of $89,000 in
household. They include the $12,000 Paris
Finally, if you are claiming the foreign earned
Part VIII.
housing expenses with Jim’s $18,000 Country X
income exclusion, the foreign housing exclu-
The Adamses cannot deduct any of Jim’s
housing expenses. This results in a larger total
sion, or both, fill out Part VIII.
unreimbursed employee business expenses be-
housing exclusion.
If you and your spouse both qualify to claim
cause they are all allocable to excluded income.
Jim and Judy had taxable U.S. interest and
the foreign earned income exclusion, the foreign
However, the Adamses are still entitled to the full
dividend income of $7,500 for the year. The
housing exclusion, or the foreign housing de-
standard deduction for a married couple filing
Adamses had no other income for the year and
duction, you and your spouse must file separate
jointly.
do not itemize deductions.
Forms 2555 to claim these benefits. See the
discussion earlier under Married Couples Living
The Adamses report their income and figure
Judy’s Form 2555 – EZ. Judy completes a
Apart.
their foreign earned income exclusions and for-
Form 2555 – EZ to figure her foreign earned in-
eign housing exclusion, as shown on the accom-
come exclusion. Her foreign earned income is
Illustrated Example
panying filled-in forms.
less than the maximum excludable amount. On
First, they list their income on the front of
Judy’s Form 2555 – EZ, Part IV, she lists her
Jim and Judy Adams are married and have two
Form 1040. Their combined salaries, including
salary on line 17. She figures an exclusion of
dependent children. They are both U.S. citizens
Jim’s $18,000 housing allowance, total
$44,000 on line 18.
and they file a joint U.S. income tax return. Each
$133,000. They enter this on line 7. They enter
The Adamses enter their combined exclu-
their interest and dividend income of $7,500 on
one has a tax home in a foreign country and
sions of $133,000 on line 21, Form 1040. They
lines 8a and 9.
each meets the physical presence test for all of
identify this item to the left of the entry space.
2001. They both can exclude their foreign
At this point, Jim will complete Form 2555
Their adjusted gross income on line 33 is
earned income up to the limit.
and Judy will complete Form 2555 – EZ to figure
$7,500, their investment income, which does not
Jim is a petroleum engineer. He works pri-
their foreign earned income and housing exclu-
qualify for exclusion.
marily in the Persian Gulf region. For 2001, his
sions.
Page 22
Chapter 4 Foreign Earned Income and Housing: Exclusion – Deduction
ADVERTISEMENT
0 votes
Related Articles
Related forms
Related Categories
Parent category: Financial