J.K. Lasser's Your Income Tax 2013: For Preparing Your 2012 Tax Return

36.4 How To Treat Housing Costs

The housing costs of employees and self-employed persons are treated differently by the tax law. Employees get a housing exclusion; self-employed persons get a deduction from taxable foreign earned income. If you live in a special camp provided by your employer, all housing costs are excluded; see 36.8.

Exclusion for employer-financed housing costs.

The housing exclusion is the excess of the employer-financed reasonable housing expenses (see below) over a “base housing amount.” The daily base housing amount is 16% of the maximum foreign earned income exclusion, prorated for the number of your qualifying days of foreign residence or presence for the year. Thus, for 2012, the base housing amount is $15,216 ($95,100 maximum foreign earned income exclusion × 16%) if you qualify under the foreign residence or physical presence test for the entire year. If you qualify under the residence or presence test for only part of the year, the $15,216 maximum base amount is prorated on a daily basis, so $41.57 ($15,216 ÷ 366) is allowed for each qualifying day in 2012.

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Filing Tip

Claiming the Housing Exclusion

On Form 2555, you figure the housing exclusion before the foreign income exclusion. The income exclusion is limited to the excess of foreign earned income over the housing exclusion.

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In figuring housing expenses ...