What Is the Foreign Housing Exclusion?

The foreign housing exclusion allows U.S. citizens and resident aliens who qualify for the foreign earned income exclusion to also exclude employer-provided foreign housing costs above a base amount from taxable income. The base housing amount is 16% of the maximum foreign earned income exclusion ($20,240 in 2024), and the exclusion covers amounts above that base up to a city-specific limit that reflects actual housing costs in major international cities. Qualifying housing costs include rent, utilities, parking, household repairs, and insurance for a foreign residence. Self-employed individuals who qualify take the foreign housing amount as a deduction against self-employment income rather than an exclusion. The foreign housing exclusion is separate from and in addition to the foreign earned income exclusion — together they can substantially reduce or even eliminate a U.S. expatriate's federal tax bill, particularly in high-cost cities like Hong Kong, Singapore, Tokyo, or London.