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IRS Revises Housing Limits Under Foreign Earned Income Exclusion

MAY 1, 2018

Notice 2018-44; 2018-21 IRB 611

DATED MAY 1, 2018
DOCUMENT ATTRIBUTES
Citations: Notice 2018-44; 2018-21 IRB 611

Superseded by Notice 2020-13 and Notice 2019-24

Revokes Notice 2018-33

Determination of Housing Cost Amounts Eligible for Exclusion or Deduction for 2018

Part III — Administrative, Procedural, and Miscellaneous

SECTION 1. PURPOSE

This notice provides adjustments to the limitation on housing expenses for purposes of section 911 of the Internal Revenue Code for specific locations for 2018. These adjustments are made on the basis of geographic differences in housing costs relative to housing costs in the United States.

SECTION 2. BACKGROUND

Section 911(a) allows a qualified individual to elect to exclude from gross income the foreign earned income and housing cost amount of such individual. The term “housing cost amount” is generally the total of the housing expenses for the taxable year minus a base housing amount. See section 911(c)(1). For this purpose, the housing expenses taken into account are limited to an amount that is tied to the maximum foreign earned income exclusion. Specifically, the limit on such housing expenses equals 30 percent (adjusted as may be provided under the Secretary's authority under section 911(c)(2)(B)) of the maximum exclusion amount (computed on a daily basis), multiplied by the number of days in the applicable period that fall within the taxable year. See section 911(c)(2)(A). Thus, under this general limitation, a qualified individual whose entire taxable year is within the applicable period is limited to maximum housing expenses of $31,170 ($103,900 x .30) for 2018.

Similarly, the computation of the base housing amount is also tied to the maximum foreign earned income exclusion. Specifically, the base housing amount is 16% of the maximum exclusion amount (computed on a daily basis), multiplied by the number of days in the applicable period that fall within the taxable year. See sections 911(c)(1)(B) and 911(d)(1). Assuming that the entire taxable year of a qualified individual is within the applicable period, the base housing amount for 2018 is $16,624 ($103,900 x .16). Section 911(c)(2)(B) authorizes the Secretary to issue regulations or other guidance to adjust the percentage under section 911(c)(2)(A)(i) (which determines the limit on housing expenses) based on geographic differences in housing costs relative to housing costs in the United States. Pursuant to this authority, the Department of the Treasury (Treasury Department) and the Internal Revenue Service (IRS) have published annual notices concerning the limitation on the section 911 housing cost amounts since the 2006 taxable year.

Notice 2018-33, 2018-17 I.R.B. 508, was issued on April 23, 2018. That notice used an incorrect amount for the maximum foreign earned income exclusion to calculate the housing cost amount for 2018. This notice revokes Notice 2018-33 and provides the correct amount of the maximum housing expenses and the base housing amount for 2018. This notice also provides an updated table of adjusted limitations on housing expenses.

For more background on the foreign housing exclusion, see https://www.irs.gov/individuals/international-taxpayers/foreign-housing-exclusion-or-deduction.

SECTION 3. TABLE OF ADJUSTED LIMITATIONS FOR 2018

The following table provides adjusted limitations on housing expenses (in lieu of the otherwise applicable limitation of $31,170) for 2018.

Country

Location

Limitation on Housing Expenses (full year)

Limitation on Housing Expenses (daily)

Angola

Luanda

84,000

230.14

Argentina

Buenos Aires

56,500

154.79

Australia

Melbourne

32,100

87.95

Australia

Perth

34,300

93.97

Australia

Sydney

64,700

177.26

Austria

Vienna

35,400

96.99

Bahamas, The

Nassau

49,700

136.16

Bahrain

Bahrain

48,300

132.33

Barbados

Barbados

37,700

103.29

Belgium

Antwerp

31,300

85.75

Belgium

Brussels

42,900

117.53

Belgium

Gosselies

38,200

104.66

Belgium

Hoogbuul

31,300

85.75

Belgium

Mons

38,200

104.66

Belgium

SHAPE/Chievres

38,200

104.66

Bermuda

Bermuda

90,000

246.58

Brazil

Rio de Janeiro

35,100

96.16

Brazil

Sao Paulo

56,600

155.07

Canada

Calgary

39,400

107.95

Canada

Montreal

52,500

143.84

Canada

Ottawa

44,600

122.19

Canada

Quebec

35,700

97.81

Canada

Toronto

46,700

127.95

Canada

Vancouver

44,700

122.47

Canada

Victoria

40,500

110.96

Cayman Islands

Grand Cayman

48,000

131.51

Chile

Santiago

40,900

112.05

China

Beijing

71,200

195.07

China

Hong Kong

114,300

313.15

China

Shanghai

57,001

156.17

Colombia

Bogota

58,700

160.82

Colombia

All cities other than Bogota

49,400

135.34

Costa Rica

San Jose

32,000

87.67

Democratic Republic of the Congo

Kinshasa

42,000

115.07

Denmark

Copenhagen

43,704

119.74

Dominican Republic

Santo Domingo

45,500

124.66

Ecuador

Quito

38,200

104.66

El Salvador

San Salvador

32,000

87.67

Estonia

Tallinn

46,600

127.67

France

Garches

73,600

201.64

France

Lyon

40,700

111.51

France

Marseille

39,700

108.77

France

Montpellier

32,800

89.86

France

Paris

73,600

201.64

France

Sevres

73,600

201.64

France

Suresnes

73,600

201.64

France

Versailles

73,600

201.64

France

All cities other than Garches, Le Havre, Lyon, Marseille, Montpellier, Paris, Sevres, Suresnes and Versailles

31,900

87.40

Germany

Babenhausen

36,100

98.90

Germany

Baumholder

35,900

98.36

Germany

Berlin

44,100

120.82

Germany

Birkenfeld

35,900

98.36

Germany

Boeblingen

43,900

120.27

Germany

Bonn

42,000

115.07

Germany

Cologne

56,200

153.97

Germany

Darmstadt

36,100

#REF!

Germany

Frankfurt am Main

37,700

103.29

Germany

Garmisch-Partenkirchen

33,900

92.88

Germany

Gelnhausen

45,500

124.66

Germany

Giessen

36,000

98.63

Germany

Grafenwoehr

36,400

99.73

Germany

Hanau

45,500

124.66

Germany

Heidelberg

33,700

92.33

Germany

Idar-Oberstein

35,900

98.36

Germany

Ingolstadt

51,500

141.10

Germany

Kaiserslautern, Landkreis

44,200

121.10

Germany

Karlsruhe

34,800

95.34

Germany

Kitzingen

31,200

85.48

Germany

Koblenz

35,400

96.99

Germany

Leimen

33,700

92.33

Germany

Ludwigsburg

43,900

120.27

Germany

Mainz

48,100

131.78

Germany

Mannheim

33,700

92.33

Germany

Munich

51,500

141.10

Germany

Nellingen

43,900

120.27

Germany

Neubruecke

35,900

98.36

Germany

Ober Ramstadt

36,100

98.90

Germany

Oberammergau

33,900

92.88

Germany

Pfullendorf

35,400

96.99

Germany

Pirmasens

44,200

121.10

Germany

Rheinau

33,700

92.33

Germany

Schwetzingen

33,700

92.33

Germany

Seckenheim

33,700

92.33

Germany

Sembach

44,200

121.10

Germany

Stuttgart

43,900

120.27

Germany

Vilseck

36,400

99.73

Germany

Wahn

42,000

115.07

Germany

Wertheim

31,200

85.48

Germany

Wiesbaden

48,100

131.78

Germany

Wuerzburg

31,200

85.48

Germany

Zweibrueken

44,200

121.10

Germany

All cities other than Augsburg, Babenhausen, Bad Aibling, Bad Kreuznach, Bad Nauheim, Baumholder, Berchtesgaden, Berlin, Birkenfeld, Boeblingen, Bonn, Bremen, Bremerhaven, Butzbach, Cologne, Darmstadt, Delmenhorst, Duesseldorf, Erlangen, Flensburg, Frankfurt am Main, Friedberg, Fuerth, Garlstedt, Garmisch-Partenkirchen, Geilenkirchen, Gelnhausen, Germersheim, Giebelstadt, Grafenwoehr, Grefrath, Greven, Gruenstadt, Hamburg, Hanau, Handorf, Hannover, Heidelberg, Heilbronn, Herongen, Idar-Oberstein, Ingolstadt, Kaiserslautern, Landkreis, Kalkar, Karlsruhe, Kerpen, Kitzingen, Koblenz, Leimen, Leipzig, Ludwigsburg, Mainz, Mannheim, Mayen, Moenchen-Gladbach, Muenster, Munich, Nellingen, Neubruecke, Noervenich, Nuernberg, Ober Ramstadt, Oberammergau, Osterholz-Scharmbeck, Pirmasens, Rheinau, Rheinberg, Schwabach, Schwetzingen, Seckenheim, Sembach, Stuttgart, Twisteden, Vilseck, Wahn, Wertheim, Wiesbaden, Worms, Wuerzburg, Zirndorf and Zweibrueken

35,400

96.99

Ghana

Accra

36,000

98.63

Greece

Athens

36,100

98.90

Greece

Elefsis

36,100

98.90

Greece

Ellinikon

36,100

98.90

Greece

Mt. Parnis

36,100

98.90

Greece

Mt. Pateras

36,100

98.90

Greece

Nea Makri

36,100

98.90

Greece

Piraeus

36,100

98.90

Greece

Tanagra

36,100

98.90

Guatemala

Guatemala City

41,800

114.52

Guinea

Conakry

51,300

140.55

Guyana

Georgetown

35,000

95.89

Holy See, The

Holy See, The

49,000

134.25

Hungary

Budapest

32,500

89.04

India

Mumbai

67,920

186.08

India

New Delhi

56,124

153.76

Indonesia

Jakarta

37,776

103.50

Ireland

Dublin

42,600

116.71

Ireland

Shannon Area

33,700

92.33

Israel

Beer Sheva

56,200

153.97

Israel

Tel Aviv

50,800

139.18

Italy

Genoa

41,800

114.52

Italy

Gioia Tauro

31,200

85.48

Italy

La Spezia

40,400

110.68

Italy

Milan

73,200

200.55

Italy

Naples

49,100

134.52

Italy

Parma

37,200

101.92

Italy

Pordenone-Aviano

38,100

104.38

Italy

Rome

49,000

134.25

Italy

Turin

36,600

100.27

Italy

Vicenza

39,900

109.32

Jamaica

Kingston

41,200

112.88

Japan

Atsugi

39,700

108.77

Japan

Camp Zama

39,700

108.77

Japan

Chiba-Ken

39,700

108.77

Japan

Fussa

39,700

108.77

Japan

Gifu

74,300

203.56

Japan

Haneda

39,700

108.77

Japan

Iwakuni

31,400

86.03

Japan

Kanagawa-Ken

39,700

108.77

Japan

Komaki

74,300

203.56

Japan

Machidi-Shi

39,700

108.77

Japan

Misawa

31,700

86.85

Japan

Nagoya

74,300

203.56

Japan

Okinawa Prefecture

56,000

153.42

Japan

Osaka-Kobe

90,664

248.39

Japan

Sagamihara

39,700

108.77

Japan

Saitama-Ken

39,700

108.77

Japan

Sasebo

32,200

88.22

Japan

Tachikawa

39,700

108.77

Japan

Tokyo

89,000

243.84

Japan

Tokyo-to

39,700

108.77

Japan

Yokohama

47,400

129.86

Japan

Yokosuka

46,100

126.30

Japan

Yokota

37,400

102.47

Jerusalem

Jerusalem

49,000

134.25

Jerusalem

West Bank

49,000

134.25

Kazakhstan

Almaty

48,000

131.51

Korea

Camp Carroll

31,600

86.58

Korea

Camp Colbern

54,200

148.49

Korea

Camp Market

59,300

162.47

Korea

Camp Mercer

54,200

148.49

Korea

K-16

59,300

162.47

Korea

Kimhae

31,700

86.85

Korea

Kimpo Airfield

59,300

162.47

Korea

Munsan

33,900

92.88

Korea

Osan AB

39,200

107.40

Korea

Pohang

31,900

87.40

Korea

Pusan

31,700

86.85

Korea

Pyongtaek

42,200

115.62

Korea

Seoul

59,300

162.47

Korea

Suwon

59,300

162.47

Korea

Taegu

36,000

98.63

Korea

Tongduchon

35,200

96.44

Korea

Uijongbu

32,700

89.59

Korea

Waegwan

31,600

86.58

Korea

All cities other than Ammo Depot #9, Camp Carroll, Camp Colbern, Camp Market, Camp Mercer, Changwon, Chinhae, Chunchon, K-16, Kimhae, Kimpo Airfield, Kunsun, Kwangju, Munsan, Osan AB, Pusan, Pyongtaek, Seoul, Suwon, Taegu, Tongduchon, Uijongbu, and Waegwan

31,900

87.40

Kuwait

Kuwait City

64,400

176.44

Kuwait

All cities other than Kuwait City

57,700

158.08

Luxembourg

Luxembourg

40,100

109.86

Macedonia

Skopje

35,400

96.99

Malaysia

Kuala Lumpur

46,200

126.58

Malaysia

All cities other than Kuala Lumpur

33,700

92.33

Malta

Malta

55,100

150.96

Mexico

Merida

37,900

103.84

Mexico

Mexico City

47,900

131.23

Mexico

Monterrey

33,200

90.96

Mexico

All cities other than Ciudad Juarez, Cuernavaca, Guadalajara, Hermosillo, Matamoros, Mazatlan, Merida, Metapa, Mexico City, Monterrey, Nogales, Nuevo Laredo, Reynosa, Tapachula, Tijuana, Tuxtla Gutierrez, and Veracruz

39,400

107.95

Mozambique

Maputo

39,500

108.22

Namibia

Windhoek

32,100

87.95

Netherlands

Amsterdam

52,900

144.93

Netherlands

Aruba

36,000

98.63

Netherlands

Brunssum

35,900

98.36

Netherlands

Eygelshoven

35,900

98.36

Netherlands

Hague, The

58,400

160.00

Netherlands

Heerlen

35,900

98.36

Netherlands

Hoensbroek

35,900

98.36

Netherlands

Hulsberg

35,900

98.36

Netherlands

Kerkrade

35,900

98.36

Netherlands

Landgraaf

35,900

98.36

Netherlands

Maastricht

35,900

98.36

Netherlands

Papendrecht

35,200

96.44

Netherlands

Rotterdam

35,200

96.44

Netherlands

Schaesburg

35,900

98.36

Netherlands

Schinnen

35,900

98.36

Netherlands

Schiphol

52,900

144.93

Netherlands

Ypenburg

58,400

160.00

Netherlands

All cities other than Amsterdam, Aruba, Brunssum, Coevorden, Heerlen, Hoensbroek, Hulsberg, Kerkrade, Landgraaf, Maastricht, Margraten, Papendrecht, Rotterdam, Schaesburg, Schinnen, Schiphol, and Ypenburg.

34,700

95.07

Netherlands Antilles

Curacao

45,800

125.48

New Zealand

Auckland

35,700

97.81

New Zealand

Christchurch

32,100

87.95

New Zealand

Wellington

33,800

92.60

Nicaragua

Managua

31,800

87.12

Nigeria

Abuja

36,000

98.63

Norway

Oslo

36,100

98.90

Oman

Muscat

41,300

113.15

Panama

Panama City

39,500

108.22

Peru

Lima

39,100

107.12

Philippines

Cavite

33,500

91.78

Philippines

Manila

37,380

102.41

Portugal

Alverca

44,800

122.74

Portugal

Lisbon

44,800

122.74

Qatar

Doha

45,888

125.72

Qatar

All cities other than Doha

32,400

88.77

Romania

Bucharest

41,200

112.88

Russia

Moscow

108,000

295.89

Russia

Saint Petersburg

60,000

164.38

Russia

Sakhalin Island

77,500

212.33

Russia

Vladivostok

77,500

212.33

Russia

Yekaterinburg

47,400

129.86

Rwanda

Kigali

31,500

86.30

Saudi Arabia

Jeddah

30,667

84.02

Saudi Arabia

Riyadh

40,000

109.59

Singapore

Singapore

80,500

220.55

Slovenia

Ljubljana

51,400

140.82

South Africa

Pretoria

39,300

107.67

Spain

Barcelona

40,600

111.23

Spain

Madrid

59,700

163.56

Spain

Rota

36,500

100.00

Spain

Valencia

34,300

93.97

Suriname

Paramaribo

33,000

90.41

Switzerland

Bern

65,600

179.73

Switzerland

Geneva

93,300

255.62

Switzerland

Zurich

39,219

107.45

Switzerland

All cities other than Bern, Geneva and Zurich

32,900

90.14

Taiwan

Taipei

46,188

126.54

Tanzania

Dar Es Salaam

44,000

120.55

Thailand

Bangkok

59,000

161.64

Trinidad and Tobago

Port of Spain

54,500

149.32

Turkey

Izmir-Cigli

31,600

86.58

Turkey

Yamanlar

31,600

86.58

Ukraine

Kiev

72,000

197.26

United Arab Emirates

Abu Dhabi

49,687

136.13

United Arab Emirates

Dubai

57,174

156.64

United Kingdom

Basingstoke

41,099

112.60

United Kingdom

Bath

41,000

112.33

United Kingdom

Bracknell

62,100

170.14

United Kingdom

Bristol

33,100

90.68

United Kingdom

Brookwood

37,200

101.92

United Kingdom

Cambridge

36,100

98.90

United Kingdom

Caversham

73,800

202.19

United Kingdom

Cheltenham

43,900

120.27

United Kingdom

Croughton

38,000

104.11

United Kingdom

Fairford

35,900

98.36

United Kingdom

Farnborough

54,700

149.86

United Kingdom

Felixstowe

34,800

95.34

United Kingdom

Gibraltar

44,616

122.24

United Kingdom

Harrogate

39,200

107.40

United Kingdom

High Wycombe

62,100

170.14

United Kingdom

Huntingdon

37,200

101.92

United Kingdom

Kemble

35,900

98.36

United Kingdom

Lakenheath

47,900

131.23

United Kingdom

Liverpool

32,600

89.32

United Kingdom

London

72,600

198.90

United Kingdom

Loudwater

57,200

156.71

United Kingdom

Menwith Hill

39,200

107.40

United Kingdom

Mildenhall

47,900

131.23

United Kingdom

Oxfordshire

36,400

99.73

United Kingdom

Plymouth

36,400

99.73

United Kingdom

Portsmouth

36,400

99.73

United Kingdom

Reading

62,100

170.14

United Kingdom

Rochester

37,400

102.47

United Kingdom

Samlesbury

37,200

101.92

United Kingdom

Southampton

44,200

121.10

United Kingdom

Surrey

48,402

132.61

United Kingdom

Waterbeach

37,300

102.19

United Kingdom

Wiltshire

34,700

95.07

United Kingdom

All cities other than Basingstoke, Bath, Belfast, Birmingham, Bracknell, Bristol, Brookwood, Brough, Cambridge, Caversham, Chelmsford, Cheltenham, Chicksands, Croughton, Dunstable, Edinburgh, Edzell, Fairford, Farnborough, Felixstowe, Ft. Halstead, Gibraltar, Glenrothes, Greenham Common, Harrogate, High Wycombe, Huntingdon, Hythe, Kemble, Lakenheath, Liverpool, London, Loudwater, Menwith Hill, Mildenhall, Nottingham, Oxfordshire, Plymouth, Portsmouth, Reading, Rochester, Samlesbury, Southampton, Surrey, Waterbeach, Welford, West Byfleet, and Wiltshire.

37,200

101.92

Venezuela

Caracas

57,000

156.16

Vietnam

Hanoi

46,800

128.22

Vietnam

Ho Chi Minh City

42,000

115.07

SECTION 4. OPTION TO APPLY 2018 ADJUSTED LIMITATIONS TO 2017 TAXABLE YEAR

For some locations, the limitation on housing expenses provided in Section 3 of this notice may be higher than the limitation on housing expenses provided in the “Table of Adjusted Limitations for 2017” in Notice 2017-21. A qualified individual incurring housing expenses in such a location during 2017 may apply the adjusted limitation on housing expenses provided in Section 3 of this notice for 2017 in lieu of the amounts provided in the "Table of Adjusted Limitations for 2017" in Notice 2017-21 (and as set forth in the Instructions to Form 2555, Foreign Earned Income, for 2017).

The Treasury Department and the IRS anticipate that future annual notices providing adjustments to housing expense limitations will make a similar option available to qualified individuals that incur housing expenses in the immediately preceding year. For example, when adjusted housing expense limitations for 2019 are issued, it is expected that taxpayers will be permitted to apply those adjusted limitations to the 2018 taxable year.

SECTION 5. Filing Prior Year or Amended Tax Returns

Notice 2011–8, 2011-8 I.R.B. 503; Notice 2012–19, 2012-10 I.R.B. 440; Notice 2013–31, 2013-21 I.R.B. 1099; Notice 2014-29, 2014-18 I.R.B. 991; Notice 2015-33, 2015-18 I.R.B. 934; Notice 2016-21, 2016-12 I.R.B. 465; and Notice 2017-21, 2017-13 I.R.B. 1026 are relisted to assist those individuals who are filing prior year or amended tax returns.

SECTION 6. EFFECT ON OTHER DOCUMENTS

This notice revokes Notice 2018-33, 2018-17 I.R.B. 508. This notice also supersedes Notice 2006-87, 2006-43 I.R.B. 766; Notice 2007-25, 2007-12 I.R.B. 760; Notice 2007-77, 2007-40 I.R.B. 735; Notice 2008-107, 2008-50 I.R.B. 1265; Notice 2010-27, 2010-15 I.R.B. 531; Notice 2011–8, 2011-8 I.R.B. 503; Notice 2012–19, 2012-10. I.R.B. 440; Notice 2013–31, 2013-21 I.R.B. 1099; Notice 2014-29, 2014-18 I.R.B. 991; Notice 2015-33, 2015-18 I.R.B. 934; Notice 2016-21, 2016-12 I.R.B. 465; and Notice 2017-21, 2017-13 I.R.B. 1026.

SECTION 7. EFFECTIVE DATE

This notice is effective for taxable years beginning on or after January 1, 2018. However, as provided in Section 4, a taxpayer may apply the 2018 adjusted housing limitations contained in Section 3 of this notice to his or her taxable year beginning in 2017.

SECTION 8. DRAFTING INFORMATION

The principal author of this notice is Kate Y. Hwa of the Office of Associate Chief Counsel (International). For further information regarding this notice contact Kate Y. Hwa on (202) 317-5001 (not a toll-free call).

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