April 1 2019

Foreign housing costs limitations for 2019

Source: IBFD Tax Research Platform News

The US Treasury Department and the US Internal Revenue Service (IRS) issued Notice 2019-24 on 28 March 2019 with the amounts to be used by US citizens and residents who are working abroad to compute their exclusion or deduction for excessive foreign housing costs.

Notice 2019–24 is issued pursuant to section 911 of the US Internal Revenue Code (IRC). This section permits qualified individuals to exclude foreign earned income from US taxation up to an annual exclusion amount (USD 105,900 for 2019) and to claim an exclusion or deduction for excessive foreign housing costs.

The threshold amount for determining whether foreign housing costs are considered excessive is 16% of the limitation for the foreign earned income exclusion. In addition, a limitation applies to the maximum amount allowed, which cannot exceed 30% of the annual foreign earned income exclusion. The Treasury Department and the IRS are authorized to adjust the maximum limitation based on geographic differences in foreign housing costs relative to housing costs in the United States.

Notice 2019–24 sets out the threshold amounts, the limitation amounts, and the adjusted per-city amounts that are permitted for specified world cities, including both daily and annual amounts.

Notice 2019–24 is effective for tax years beginning on or after 1 January 2019. Notice 2019–24 provides, however, that taxpayers may elect to use the 2019 amount for a particular city for taxable years beginning in 2018 if it is higher than the amount published for 2018 in Notice 2018-44.

Notice 2019–24 is in the IRS Internal Revenue Bulletin (IRB) as part of IRB 2019-14 dated 1 April 2019.