Publication 54 - Tax Guide For U.s. Citizens And Resident Aliens Abord - 2011 Page 22
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44Example. Tom and Jane live together and
If you choose the housing exclusion, you must
the remaining $6,000 as a housing deduction
figure it before figuring your foreign earned in-
subject to the following limit.
file a joint return. Tom was a bona fide resident
come exclusion. You cannot claim less than the
of and had his tax home in Ghana from August
full amount of the housing exclusion to which
17, 2011, through December 31, 2012. Jane
Limit
you are entitled.
was a bona fide resident of and had her tax
home in Ghana from September 15, 2011,
Figuring tax on income not excluded. If
Your housing deduction cannot be more than
through December 31, 2012.
you claim the housing exclusion, the foreign
your foreign earned income minus the total of:
During 2011, Tom received $75,000 of for-
earned income exclusion (discussed earlier), or
•
eign earned income and Jane received $50,000
Your foreign earned income exclusion,
both, you must figure the tax on your nonex-
of foreign earned income. Tom paid $10,000 for
plus
cluded income using the tax rates that would
housing expenses, of which $7,500 was for ex-
•
have applied had you not claimed the exclu-
Your housing exclusion.
penses incurred from September 15 through the
sions. See the instructions for Form 1040 and
end of the year. Jane paid $3,000 for housing
complete the Foreign Earned Income Tax Work-
Carryover. You can carry over to the next
expenses in 2011, all of which were incurred
sheet to figure the amount of tax to enter on
year any part of your housing deduction that is
during her period of residence in Ghana.
Form 1040, line 44. If you must attach Form
not allowed because of the limit. You are al-
Tom and Jane figure their housing amount
6251 to your return, use the Foreign Earned
lowed to carry over your excess housing deduc-
jointly. If Tom claims the housing exclusion, their
Income Tax Worksheet provided in the instruc-
tion to the next year only. If you cannot deduct it
housing expenses would be $13,000 and their
tions for Form 6251.
in the next year, you cannot carry it over to any
base housing amount, using Tom’s period of
Foreign tax credit or deduction. Once you
other year. You deduct the carryover in figuring
residence (Aug. 17 – Dec. 31, 2011), would be
adjusted gross income. The amount of carryover
$5,579 ($40.72 × 137 days). Tom’s housing
choose to exclude foreign housing amounts, you
you can deduct is limited to your foreign earned
cannot take a foreign tax credit or deduction for
amount would be $7,421 ($13,000 – $5,579). If,
income for the year of the carryover minus the
taxes on income you can exclude. If you do take
instead, Jane claims the housing exclusion, their
total of your foreign earned income exclusion,
a credit or deduction for any of those taxes, your
housing expenses would be limited to $10,500
housing exclusion, and housing deduction for
choice to exclude housing amounts may be con-
($7,500 + $3,000) and their base housing
that year.
sidered revoked. See Publication 514 for more
amount, using Jane’s period of residence (Sept.
information.
15 – Dec. 31, 2011), would be $4,398 ($40.72 ×
Married Couples
108 days). Jane’s housing amount would be
Earned income credit. If you claim the for-
$6,102 ($10,500 – $4,398).
eign housing exclusion, you will not qualify for
If both you and your spouse qualify for the for-
the earned income credit for the year.
eign housing exclusion or the foreign housing
deduction, how you figure the benefits depends
Foreign Housing Deduction
Form 2555 and
on whether you maintain separate households.
Form 2555-EZ
If you do not have self-employment income, you
cannot take a foreign housing deduction.
Separate Households
How you figure your housing deduction de-
If you are claiming the foreign earned income
pends on whether you have only self-employ-
If you and your spouse live apart and maintain
exclusion only, you can use Form 2555. In some
ment income or both self-employment income
separate households, you both may be able to
circumstances, you can use Form 2555-EZ to
and employer-provided income. In either case,
claim the foreign housing exclusion or the for-
claim the foreign earned income exclusion. You
the amount you can deduct is subject to the limit
eign housing deduction. You both can claim the
must file one of these forms each year you are
described later.
exclusion or the deduction if both of the following
claiming the exclusion.
conditions are met.
If you are claiming either the foreign housing
Self-employed — no employer-provided
•
You and your spouse have different tax
amounts. If none of your housing amount is
exclusion or the foreign housing deduction, you
homes that are not within reasonable com-
must use Form 2555. You cannot use Form
considered paid for with employer-provided
muting distance of each other.
2555-EZ. Form 2555 shows how you meet the
amounts, such as when all of your income is
bona fide residence test or physical presence
from self-employment, you can deduct your
•
Neither spouse’s residence is within rea-
test, how much of your earned income is ex-
housing amount, subject to the limit described
sonable commuting distance of the other
cluded, and how to figure the amount of your
later.
spouse’s tax home.
allowable housing exclusion or deduction.
Take the deduction by including it in the total
on line 36 of Form 1040. On the dotted line next
Do not submit Form 2555 or Form 2555-EZ
Housing exclusion. Each spouse claiming a
to line 36, enter the amount and write “Form
by itself.
housing exclusion must figure separately the
2555.”
part of the housing amount that is attributable to
Form 2555-EZ
Self-employed and employer-provided
employer-provided amounts, based on his or
amounts. If you are both an employee and a
her separate foreign earned income.
Form 2555-EZ has fewer lines than Form 2555.
self-employed individual during the year, you
You can use this form if all seven of the following
can deduct part of your housing amount and
apply.
One Household
exclude part of it. To find the part that you can
•
exclude, multiply your housing amount by the
You are a U.S. citizen or a resident alien.
If you and your spouse lived in the same foreign
employer-provided amounts (discussed earlier)
•
Your total foreign earned income for the
household and file a joint return, you must figure
and then divide the result by your foreign earned
year is $92,900 or less.
your housing amounts jointly. If you file separate
income. This is the amount you can use to figure
•
returns, only one spouse can claim the housing
You have earned wages/salaries in a for-
your foreign housing exclusion. You can deduct
exclusion or deduction.
the balance of the housing amount, subject to
eign country.
In figuring your housing amount jointly, you
the limit described later.
•
You are filing a calendar year return that
can combine your housing expenses and figure
covers a 12-month period.
Example. Your housing amount for the year
one base housing amount. Either spouse (but
•
is $12,000. During the year, your total foreign
not both) can claim the housing exclusion or
You did not have any self-employment in-
earned income is $80,000, of which half
housing deduction. However, if you and your
come for the year.
($40,000) is from self-employment and half is
spouse have different periods of residence or
•
You did not have any business or moving
from your services as an employee. Half of your
presence and the one with the shorter period of
expenses for the year.
housing amount ($12,000 ÷ 2) is considered
residence or presence claims the exclusion or
•
provided by your employer. You can exclude
deduction, you can claim as housing expenses
You are not claiming the foreign housing
$6,000 as a housing exclusion. You can deduct
only the expenses for that shorter period.
exclusion or deduction.
Chapter 4 Foreign Earned Income and Housing: Exclusion – Deduction
Page 22
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