Form 2555 Housing Exclusion

[Bonnie]

Can someone please explain the Housing Exclusion for the 2555 and what qualifies for this exclusion. I have read everything I can find on this and still don't understand it. If the employer provides housing for the taxpayer at the work location overseas, does this qualify some of the income to be used for the housing exclusion?

Thanks
Bonnie

[Koss]

Housing

If the employer is providing housing to the employee in the foreign country, then the employee may be able to exclude the fair market value of the housing by using the foreign housing exclusion.

But be careful. If the employer is not reporting the value of the housing as income on any reporting documents, then it is already excluded. In other words, you cannot subtract something that isn't there to begin with.

In principle, the value of the housing is taxable income from the get go. A US citizen must report all of their worldwide income, and if the employer gives the guy a place to live, or pays the rent for him in the foreign country, that's taxable income. The employer may or may not have to document it as income, based on local laws in the foreign country. But for the taxpayer, it still has to be reported.

So if he qualifies for the exclusion...

If the employer has somehow included the housing on Form W-2, or some other reporting document, then you have to explicitly back it out somehow, so that it is not included in AGI on Form 1040. It also has to be documented on Form 2555. If the employer has not reported it, then there is nothing to back out. You simply don't report it anywhere on Form 1040. You report it on Form 2555 as income that has been excluded.

Burton

[Bonnie]

Thanks for your help. That all makes sense now. Kinda what I was thinking but didn't want to miss something if they were entitled to it.

Thanks
Bonnie