Foreign Housing Exclusion (FHE) for Americans Abroad

Foreign Housing Exclusion (FHE) for Americans Abroad 

For 2026, the Foreign Housing Exclusion (FHE) allows U.S. taxpayers living abroad to exclude certain housing-related expenses from their taxable income, in addition to the Foreign Earned Income Exclusion (FEIE).

Key Details for 2026 (Projected, Based on Past Trends)

  1. Base Housing Amount (Standard Limit):

    • Typically set at 16% of the FEIE maximum.
    • For 2026, if the FEIE is projected at 120,000** (based on inflation adjustments), the base housing amount would be around **19,200 (16% of $120,000).

  2. Total Housing Exclusion Limit:

    • The IRS sets a cap on excludable housing expenses, usually 30% of the FEIE (but higher in high-cost cities).
    • For 2026, this could be around 36,00* (30% of 120,000).

  3. Eligible Expenses:

    • Rent, utilities (except phone/internet), property insurance, parking, and some furnishings.
    • Not eligible: Mortgage principal, home improvements, domestic labor.

  4. High-Cost Locations:

    • If you live in an expensive city (e.g., London, Tokyo), the IRS may allow a higher exclusion.

How to Claim It

  • File Form 2555 with your tax return.
  • Must qualify under either the Bona Fide Residence Test or Physical Presence Test.

Important Notes

  • The FHE is in addition to the FEIE.
  • Exact 2026 figures will be confirmed by the IRS in late 2025.


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