Corrected Foreign Housing Cost Exclusions for 2018

News from RWHSG

Posted by Kim Chen on May 4th, 2018

A U.S. citizen (or U.S. resident alien) living abroad can elect to exclude the foreign earned income and housing cost amount from gross income (subject to certain limitations). The Section 911 housing cost exclusion is calculated based on the number of days physically present in the foreign location. In addition, the IRS allows a higher housing cost ceiling for taxpayers living in certain high-cost geographic locations (relative to the U.S.). Recently, the IRS released Notice 2018-33, which included a table of adjusted limitations on housing expenses for 2018. However, the Notice used an incorrect amount for the maximum foreign earned income exclusion to calculate the housing cost amount for 2018. As such, the IRS has revoked Notice 2018-33 and issued a new Notice that provides the correct amount of the maximum housing expenses and the base housing amount for 2018. Some taxpayers may elect to apply the 2018 limitation for tax years beginning in 2017. Notice 2018-44, 2018-21 IRB.