Foreign Housing Exclusion
Taxpayers can claim an exclusion from gross income for their rental housing amount if they reside in a foreign country and they qualify under the bona fide residence test or the physical presence test. The exclusion helps to reduce earned income that was used to pay for housing expenses, which includes amounts paid by the employer to the taxpayer as salary or wages. Housing expenses include reasonable expenses paid or incurred for housing for the taxpayer, spouse and dependents. The foreign housing exclusion is claimed on Form 2555.