The U.S. Internal Revenue Service (IRS) issued a notice providing adjustments to the limitation on housing expenses for specific locations for purposes of the foreign housing cost exclusion under IRC §911 [
Notice 2021-18, 2-26-21
IRC §911 generally allows a U.S. citizen or resident living abroad to exclude from U.S. taxable income certain foreign earned income. A qualified individual is also allowed an exclusion from gross income for certain housing costs paid or incurred on their behalf that exceed a certain base housing amount.
Tax Increase Prevention and Reconciliation Act of 2005 (Pub. L. 109-222)
, the U.S. Secretary of the Treasury is authorized to make annual adjustments to this limit based on geographic differences in housing costs.
A qualified individual incurring housing expenses in one or more of the listed high-cost localities in 2021 may use the adjusted limit specified (instead of $32,610) in determining the housing cost amount on
Foreign Earned Income
. The $32,610 limit continues to apply to a qualified individual not incurring housing expenses in a listed high-cost locality.
Notice 2021-18, which includes a revised table, supersedes Notice 2020-13 (see
Payroll Currently, Issue 3, Vol. 28
). Notice 2021-18 is effective for taxable years beginning on or after January 1, 2021. However, a taxpayer may elect to apply the 2021 adjusted housing limitations contained in the notice to their taxable year beginning in 2020.
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Jyme Mariani, Esq., is Managing Editor of Payroll Information Resources for the American Payroll Association (APA) and the Global Payroll Management Institute (09电竞手游娱乐正规).