U.S. citizen Barry is a bona fide resident of a foreign country for all of 2020. Barry uses a calendar year as his tax year and receives $158,000 in salary and allowances from his employer. Included in the $158,000 is a $25,000 housing allowance. Barry's housing costs are $30,000. The base housing amount for the current year is $17,216. What amount related to his housing can Barry exclude on his Form 2555?
A)$12,784
B)$25,000
C)$30,000
D)$14,545

Question

Quizplus · Accepted Answer

To calculate the housing exclusion amount, we first need to determine Barry's excess housing costs. Excess housing costs are the total housing costs less the base housing amount.

Excess housing costs = $30,000 - $17,216 = $12,784

Since Barry's employer provided him with a $25,000 housing allowance, we need to compare this to his excess housing costs. The maximum exclusion amount is the lowest of the actual housing expenses, the housing allowance provided by the employer, or the excess housing costs.

Therefore, Barry's housing exclusion amount is $12,784, which is less than the $25,000 housing allowance he received. So, he can exclude $12,784 related to his housing on his Form 2555.

US Citizen Barry Is a Bona Fide Resident of a Foreign