Publication 54 - Tax Guide For U.s. Citizens And Resident Aliens Abord - 2011 Page 23
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44Form 2555
these remote sites, his employer provided him
allowance on line 22e, and the fair market value
lodging and meals at nearby camps. Satisfac-
of meals and lodging provided in camps by his
tory housing was not available on the open mar-
employer on lines 21a and 21b. The entries on
If you claim exclusion under the bona fide resi-
ket near these drilling sites, and the lodging was
lines 21a and 21b are not shown as income on
dence test, you should fill out Parts I, II, IV, and V
provided in common areas that normally accom-
Form 1040. Jim enters the total of these two
of Form 2555. In filling out Part II, be sure to give
modated 10 or more employees and were not
entries on line 25 of Form 2555.
your visa type and the period of your bona fide
available to the general public. The fair market
residence. Frequently, these items are over-
Jim combines his housing expenses,
value of the lodging he was provided in these
looked.
$19,000, with the qualified expenses for the sec-
camps was $2,000, and the value of the meals
If you claim exclusion under the physical
ond household, $12,000, and enters total hous-
was $1,000.
presence test, you should fill out Parts I, III, IV,
ing expenses of $31,000 on line 28. His limit on
and V of Form 2555. When filling out Part III, be
Jim had $2,500 of unreimbursed employee
housing expenses is $27,870 (30% of $92,900)
sure to insert the beginning and ending dates of
business expenses for travel, meals, and lodg-
because his qualifying period includes all of
your 12-month period and the dates of your
ing that were allocable to his foreign earned
2011 and the expenses were not incurred in
arrivals and departures, as requested in the
income.
high-cost localities. Jim enters $27,870 on lines
travel schedule.
29b and 30. This is the limit on his housing
Because of adverse conditions in Country X,
You must fill out Part VI if you are claiming a
expenses. He puts a base housing amount of
Judy and the children lived in City Y, Country Y
foreign housing exclusion or deduction.
$14,864 on line 32 and subtracts that amount to
(which is not a high-cost locality), where she
Fill out Part IX if you are claiming the foreign
arrive at a total foreign housing amount of
worked as an executive secretary with a U.S.
housing deduction.
$13,006 on line 33. He figures a housing exclu-
company. Her earnings from this job were
If you are claiming the foreign earned income
sion of $13,006 on line 36.
$47,000. These earnings were subject to foreign
exclusion, fill out Part VII.
Jim figures his foreign earned income exclu-
income tax.
Finally, if you are claiming the foreign earned
sion in Part VII of Form 2555. Because his for-
The Adams family rented an apartment in
income exclusion, the foreign housing exclu-
eign earned income ($100,000) is more than the
Country Y for Judy and the children. They paid
sion, or both, fill out Part VIII.
maximum exclusion of $92,900, he must reduce
$1,000 a month rent, including utilities, or
If you and your spouse both qualify to claim
the income by the housing exclusion. The for-
$12,000 for the year. The Adamses choose to
the foreign earned income exclusion, the foreign
eign earned income exclusion on line 42 is
treat the expenses for the apartment as those for
housing exclusion, or the foreign housing de-
$86,994 ($100,000 – $13,006).
a qualified second foreign household. They in-
duction, you and your spouse must file separate
When Jim combines this exclusion of
clude the $12,000 Country Y housing expenses
Forms 2555 to claim these benefits. See the
$86,994 with his housing exclusion of $13,006
with Jim’s $19,000 Country X housing ex-
discussion earlier under Separate Households.
he comes up with a total exclusion of $100,000
penses. This results in a larger total housing
in Part VIII.
exclusion.
Illustrated Example
The Adamses cannot deduct any of Jim’s
Jim and Judy had taxable U.S. interest in-
$2,500 of unreimbursed employee business ex-
come of $7,500 for the year. The Adamses had
Jim and Judy Adams are married and have two
penses because they are all allocable to ex-
no other income for the year and do not itemize
dependent children. They are both U.S. citizens
cluded income. However, the Adamses are still
deductions.
and they file a joint U.S. income tax return. Each
entitled to the full standard deduction for a mar-
The Adamses report their income and figure
one has a tax home in a foreign country and
ried couple filing jointly.
their foreign earned income exclusions and for-
each meets the physical presence test for all of
eign housing exclusion, as shown on the accom-
2011. They both can exclude their foreign
Judy’s Form 2555-EZ. Judy completes a
panying filled-in forms.
earned income up to the limit. Their qualified
Form 2555-EZ to figure her foreign earned in-
First, they list their income on the front of
housing expenses are limited to 30% of the
come exclusion. Her foreign earned income is
Form 1040. Their combined salaries, including
maximum foreign earned income exclusion.
less than the maximum excludable amount. On
Jim’s $19,000 housing allowance, total
Jim is a petroleum engineer. For 2011, his
Judy’s Form 2555-EZ, Part IV, she lists her
$147,000. They enter this on line 7. They enter
salary, which was entirely from foreign sources,
salary on line 17. She figures an exclusion of
their interest income of $7,500 on line 8a.
was $81,000. In addition, his employer provided
$47,000 on line 18.
At this point, Jim will complete Form 2555
him an annual housing allowance of $19,000,
The Adamses enter their combined exclu-
and Judy will complete Form 2555-EZ to figure
which he used to maintain a rented apartment at
sions of $147,000 in parentheses on line 21,
their foreign earned income and housing exclu-
his tax home in City A, Country X (which is not a
Form 1040. They identify this item to the left of
sions.
high-cost locality), for the period he was not
the entry space. Their adjusted gross income on
working at remote drilling sites.
line 37 (not shown) is $7,500 (their investment
At various times during the year, Jim worked
Jim’s Form 2555. On Jim’s Form 2555, Part
income), which does not qualify for exclusion.
at remote oil drilling sites. While he worked at
IV, he lists his salary on line 19, his housing
Chapter 4 Foreign Earned Income and Housing: Exclusion – Deduction
Page 23
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