The foreign earned income exclusion and foreign housing exclusion provide some tax relief for US citizens living and working abroad. Which of the following is NOT a requirement to qualify for the foreign housing exclusion?

1.Foreign housing expenses may not be more than total foreign earned income for the tax year

2.The taxpayer must have qualified housing expenses in a foreign country

3.The taxpayer’s employer pays a housing stipend that is excluded from gross income

4.The taxpayer files Form 2555 to claim the foreign housing exclusion

answer

The taxpayer’s employer pays a housing stipend that is excluded from gross income

explanation

This correct answer in this question is the one that is a false statement.

To qualify, housing must be paid for by employer-provided funds; however, the amounts paid for housing, whether as wages or designated housing allowance, must be included in gross income.

The other statements are true. Foreign housing expenses may not be more than foreign earned income and must be paid for qualified housing expenses in a foreign country. Form 2555 is used to claim the foreign housing exclusion.