Foreign Housing Exclusion Calculator (2026)
The foreign housing exclusion lets US expats exclude housing costs on top of the regular FEIE — potentially adding $10,000–$95,000 of additional tax-free income, depending on your city. Most expats either overlook it or miscalculate it. This tool does the math for you using 2026 IRS Notice 2026-25 limits.
How the housing exclusion is calculated
The foreign housing exclusion under IRC §911(c) has three moving parts. All three constrain the final number — the smallest of the three is what you actually get.
Step 1: Housing cost amount
Start with your actual qualifying housing expenses for the year. Subtract the base housing amount — the IRS's assumption about what a US-based employee would spend on housing regardless of location. For 2026, the base is $21,264 for a full year (16% × $132,900 FEIE maximum, prorated by qualifying days).1
Result: housing cost amount = qualifying expenses − base amount
Step 2: Location cap
Your housing cost amount is then capped by the IRS's location-specific limit for your city, published annually in a Notice (Notice 2026-25 for 2026 tax year).2 For cities not on the list, the standard cap is $39,870 (30% of FEIE maximum). High-cost cities like Geneva, Hong Kong, and London have much higher caps because actual expat housing costs in those markets far exceed the US baseline.
Step 3: Income limit
The combined FEIE + housing exclusion cannot exceed your total foreign earned income. Since FEIE is applied first (up to $132,900), the housing exclusion can only absorb income above that threshold. If your FEI is $200,000 and you take the full $132,900 FEIE, the housing exclusion is limited to $67,100 — even if your actual housing cost amount is higher.
This is the most commonly missed constraint. If your FEI is $132,900 or less, you cannot use the housing exclusion at all — the FEIE already covers your entire earned income, leaving nothing for the housing exclusion to shelter.
2026 location caps for major expat cities
The following limits are from IRS Notice 2026-25 (released April 7, 2026). Maximum exclusion = cap − $21,264 base.
| City | 2026 Annual Cap | Max Housing Exclusion |
|---|---|---|
| Geneva, Switzerland | $116,900 | $95,636 |
| Hong Kong | $114,300 | $93,036 |
| Sydney, Australia | $114,300 | $93,036 |
| Moscow, Russia | $108,000 | $86,736 |
| Bermuda | $90,000 | $68,736 |
| Singapore | $86,700 | $65,436 |
| Bern, Switzerland | $82,200 | $60,936 |
| London, UK | $73,700 | $52,436 |
| Vancouver, Canada | $73,400 | $52,136 |
| Tokyo, Japan | $67,700 | $46,436 |
| Paris, France | $65,700 | $44,436 |
| Toronto, Canada | $62,700 | $41,436 |
| Dubai, UAE | $57,000 | $35,736 |
| Abu Dhabi, UAE | $49,000 | $27,736 |
| Muscat, Oman | $41,300 | $20,036 |
| Riyadh, Saudi Arabia | $40,000 | $18,736 |
| All other locations | $39,870 | $18,606 |
IRS Notice 2026-25 covers 137 locations total. If your city is not on the list, use the standard $39,870 cap. Caps are prorated by qualifying days for partial-year filers.
What qualifies as a housing expense
Included:
- Rent (apartment, house, condo)
- Utilities: electricity, gas, water, sewage — not telephone or internet
- Renter's or homeowner's property insurance
- Occupancy taxes levied on your rental unit
- Non-refundable lease deposits
- Residential parking (one space for non-commercial use)
- Rental cost of furniture if you rented a furnished apartment and paid separately for furnishings
- If you own your home abroad: mortgage interest, property taxes, and homeowner's insurance are qualifying expenses (though you cannot then deduct them separately on Schedule A)
Not included:
- Telephone, internet, cable
- Food and groceries
- Household services (cleaning staff, cooks, nannies)
- Mortgage principal payments
- Lavish or extravagant housing beyond what is reasonable for your location
- Housing expenses of family members living elsewhere
- The value of any housing your employer pays for in which you live on employer premises (military base housing, provided housing, etc.) — those are excluded under different rules
Employee vs. self-employed: exclusion vs. deduction
If you receive wages (W-2 or equivalent), you use the housing exclusion — qualifying housing costs above the base are excluded from gross income on Form 2555, Line 29–36. The exclusion reduces your AGI and taxable income directly.
If you are self-employed (Schedule C, 1099-NEC, or foreign sole proprietor), qualifying excess housing costs are claimed as a housing deduction instead, on Form 2555, Line 36. Mechanically, the formula is identical — housing expenses minus base, capped by location limit and income — but the deduction reduces your self-employment income rather than gross income, which means it also reduces your SE tax base. For most self-employed expats, the housing deduction provides slightly more tax relief than the employee exclusion for the same dollar amount.
Both are reported on Form 2555, Part VIII. You don't choose between them — the form applies whichever applies based on your income type.
Why FTC users cannot use this exclusion
The foreign housing exclusion is available only to taxpayers who have elected the Foreign Earned Income Exclusion under §911(a). If you use the Foreign Tax Credit (Form 1116) exclusively — common in high-tax countries like Germany, France, and Japan where foreign taxes already cover or exceed your US liability — the housing exclusion is unavailable. Your earned income remains in your AGI and is credited against foreign taxes, but there is no parallel "housing credit."
Some expats in medium-tax countries (UK, Netherlands, Italy) may actually maximize their overall position by claiming partial FEIE plus FTC on the remainder. A specialist can model the hybrid approach. Use our FEIE vs FTC calculator for a directional comparison.
The income limit trap: when FEI is close to the FEIE maximum
The most common planning mistake: an expat earning $135,000 in London assumes they can claim both a full FEIE ($132,900) and a London housing exclusion (up to $52,436). They cannot.
- FEI: $135,000
- FEIE: $132,900 (maximum)
- Remaining income available for housing exclusion: $135,000 − $132,900 = $2,100
- Even if their actual housing cost amount is $40,000, the housing exclusion is capped at $2,100
The practical implication: the housing exclusion provides meaningful benefit only when your FEI materially exceeds $132,900. At $150,000 the maximum housing shelter is $17,100. At $200,000 it is $67,100. At $250,000 it is limited only by your actual qualifying expenses and the city cap.
For earners close to the FEIE threshold, it may occasionally make sense to deliberately reduce the FEIE election (i.e., exclude less than $132,900) to make room for a larger housing exclusion — this can save tax when the housing cost amount is large and the marginal rate is high. A specialist can run this optimization.
Partial-year qualifying period
If you qualified for FEIE for only part of 2026 — a mid-year move, a gap in physical presence, or a transition year — all three limits prorate by qualifying days:
- Base prorated = $21,264 × (qualifying days ÷ 365)
- Location cap prorated = city cap × (qualifying days ÷ 365)
- FEIE max prorated = $132,900 × (qualifying days ÷ 365)
Housing expenses themselves are only counted for the period during which you were in the qualifying foreign location. If you returned to the US mid-year, you cannot count rent paid after your return date.
Related tools and guides
- Foreign Earned Income Exclusion — eligibility tests, SE tax trap, 5-year revocation lock
- FEIE vs Foreign Tax Credit Calculator — which strategy costs less for your income level
- Roth Conversion Window Calculator — using FEIE to convert at near-zero rates
- US Expats in the UK — London housing cap, SIPP traps, ISA PFIC risk
- US Expats in Singapore — housing exclusion advantage, FEIE vs FTC, CPF
- US Expats in the UAE — FEIE in a zero-tax country, Dubai housing exclusion
- Match with an expat financial specialist
Run the full optimization with a specialist
The housing exclusion interacts with the Roth conversion window, capital-gains bracket stacking, the FEIE revocation risk, state domicile, and the foreign housing deduction for self-employed expats. Getting the sequence right can be worth $5,000–$25,000 per year. A flat-fee expat financial advisor can model your complete picture in a single planning engagement.
- IRS — Foreign Housing Exclusion or Deduction (§911(c)). Base amount = 16% × FEIE max × (days/365). For 2026: $21,264 full year.
- IRS Notice 2026-25 — 2026 foreign housing expense limits for 137 locations; released April 7, 2026. Standard cap = $39,870 (30% × $132,900).
- IRS Notice 2025-67 — 2026 FEIE maximum: $132,900.
- IRS Form 2555 — Foreign Earned Income — Part VIII (lines 28–43) is where the housing exclusion or deduction is computed on the actual tax return.
- Location-specific caps cross-referenced against KPMG GMS Flash Alert 2026-090 and Greenback Tax Services 2026 housing exclusion guide. Values verified June 2026.
This tool provides directional estimates only. Qualifying housing expenses, partial-year proration, employer-provided housing offsets, and the FEIE/FTC election interact in ways that vary by individual. Consult a qualified US expat tax specialist before filing.