US Foreign Housing Exclusion Calculator

It is your qualifying housing costs above a base amount of $21,264, up to a location limit. On the standard limit of $39,870, the maximum exclusion is $18,606. In high-cost cities the limit is far higher — London's 2026 limit is $68,600, giving a maximum exclusion of up to about $47,336. Both figures are prorated by the number of days you qualify during the year, and the exclusion cannot exceed your foreign earned income.

$21,264, which is 16% of the $132,900 Foreign Earned Income Exclusion. Only housing costs above this base count toward the exclusion — the base represents the amount the law assumes you would have spent on housing anyway. For a part-year of qualification the base is prorated by qualifying days, so someone who qualifies for half the year uses a base of about $10,632.

$68,600 under IRS Notice 2026-25, effective for tax years beginning on or after 1 January 2026. London is one of the highest-limit cities the IRS lists. After subtracting the $21,264 base amount, a US citizen in London who qualifies for the full year and has enough foreign earned income can exclude up to roughly $47,336 of qualifying housing costs — more than two and a half times the $18,606 available on the standard cap.

Reasonable costs of housing yourself, your spouse and dependants abroad: rent, utilities other than telephone, property and contents insurance, non-refundable occupancy deposits, residential parking, rental of furniture and accessories, and household repairs. Employer-provided accommodation counts at its fair rental value. Excluded are the purchase price of a home, mortgage principal or interest, capital improvements, purchased furniture, domestic staff wages, television subscriptions, and anything lavish beyond what is reasonable.

Yes, and both are claimed on the same Form 2555. The housing exclusion is computed first, and the FEIE is then limited to your foreign earned income minus the housing amount already excluded, so the two together can never exceed your total foreign earnings. For high earners in expensive cities the combined shelter is much larger than the FEIE alone — a Londoner in 2026 could shelter $132,900 plus up to about $47,336 of housing costs.

Yes. The base amount, the location limit and the FEIE maximum are all multiplied by the number of qualifying days divided by 365. If you moved to London on 1 July and qualified for 184 days, each figure is multiplied by 184/365. Applying the full-year numbers to a part-year of qualification is the single most common cause of over-claiming the exclusion, so the day count matters.

No. The foreign housing exclusion is not an itemised deduction — it removes income from your return on Form 2555 before you reach the standard-or-itemise choice. You can take the standard deduction and still claim the exclusion. The one interaction to watch is that homeowners cannot count mortgage interest and property taxes as housing expenses here if they are already claiming them as itemised deductions on Schedule A.

Not the exclusion — the self-employed use the parallel foreign housing deduction instead. It uses the same $21,264 base amount and the same location limits, but it reduces adjusted gross income rather than excluding income, is limited to foreign earned income after the FEIE, cannot create a loss, and any excess carries over only to the following year. Americans running a UK limited company are usually employees of that company and use the exclusion; sole traders and partners use the deduction.

Yes. Income you exclude cannot also generate a foreign tax credit, so any UK tax attributable to the excluded housing amount is not creditable. For high earners paying UK tax at 40% or 45%, the foreign tax credit often eliminates the US liability on its own, and stacking a housing exclusion on top can waste UK tax that would otherwise carry forward as excess credit. Whether the exclusion or the credit is better needs both scenarios modelled.

Only one per household for a shared home. If you and your spouse live together, one of you claims the housing exclusion for the shared residence — you cannot both exclude the same rent. Each spouse can claim their own FEIE against their own earnings. Where spouses genuinely maintain separate foreign households, each can claim on their own dwelling, but that is uncommon for couples living together.

For 2026, besides London at $68,600, IRS Notice 2026-25 lists Caversham at $73,800, Loudwater at $57,400, Farnborough at $54,700, Cheltenham at $54,300, Surrey at $48,402, Harrogate and Menwith Hill at $46,600, Bath at $41,000 and Basingstoke at $41,099, among others. If your location is not on the list, the standard limit of $39,870 applies. Using the standard cap when a higher city limit is available is a common and costly error.

On Form 2555, filed with your Form 1040. You complete the parts covering the housing exclusion and, if relevant, the foreign housing deduction, in addition to the FEIE section. It is an election that stays in force until you revoke it, and revoking it generally prevents you from re-electing for five years without IRS consent. Because of that multi-year effect, and the trade-off against the foreign tax credit, it is worth modelling before you file rather than defaulting to it.