An exclusion, claimed with the foreign earned income exclusion on Form 2555, for reasonable housing costs abroad above a base amount, subject to a cap that varies by city.
High-rent cities like London, Singapore, and Zurich have higher caps, so the exclusion can be worth thousands. It covers rent, utilities other than phone, and insurance, not mortgage principal or furniture.
Self-employed people take a housing deduction rather than an exclusion; the mechanics differ but the effect is similar.
Source: IRC 911(c); IRS Publication 54 and annual housing cost table
Last reviewed September 17, 2026. Tax rules change; confirm current law before acting.
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