36.6 Claiming Deductions
You may not deduct expenses that are allocable to the foreign earned income and housing exclusions. If you elect the earned income exclusion, you deduct expenses as follows:
Personal or nonbusiness deductions, such as medical expenses, mortgage interest, and real estate taxes paid on a personal residence, are deductible if you itemize deductions. Business expenses that are attributable to earning excludable income are not deductible. Dependency exemptions are fully deductible; see Example 1 below.
If your foreign earnings exceed the exclusion ceiling, you allocate expenses between taxable and excludable income and deduct the amount allocated to taxable earned income; see Example 2 below.
If your job expenses are reimbursed and the expenses are adequately ...
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