Melanie,a U.S.citizen living in Paris,France,for the last three years earns a salary of $125,000 in 2015.Melanie's housing costs are $24,000 per year,which is reasonable.How much can Melanie exclude from income?

Question

Quizplus · Accepted Answer

Melanie can exclude a certain amount of her salary from U.S. taxes using the Foreign Earned Income Exclusion (FEIE). For tax year 2015, the maximum excluded amount is $100,800.

However, Melanie's housing costs can also qualify for exclusion under the Foreign Housing Exclusion (FHE). The FHE allows for an additional exclusion above the FEIE for housing costs that exceed a certain threshold, based on where Melanie is living.

According to the IRS, the reasonable amount of housing expenses for Paris in 2015 was $31,770. Melanie's housing costs of $24,000 are below this threshold, so she cannot claim the FHE.

Therefore, the maximum amount Melanie can exclude from her income is the FEIE of $100,800.