In the US the Internal Revenue Service (IRS) has issued Notice 2014-29 providing inflation-adjusted limitations on foreign housing expenses for the 2014 tax year. The figures included in the Notice show that Hong Kong, Moscow, and Geneva are judged to be the three most expensive foreign cities to live in for purposes of the United States tax code’s foreign housing exclusion. This Notice which is to be published officially in the Internal Revenue Bulletin dated April 28 2014 gives guidance on how an individual can elect to exclude certain housing costs from gross income in the 2014 tax year, beginning on January 1 2014.
By the use of a specified formula, the US tax code generally limits the allowable housing expenses to 30 percent of the excludable amount applicable for each year, which is USD99,200 for 2014. Assuming that the entire taxable year of a qualified individual is spent abroad within the tax year, the maximum housing expenses limit for 2014 would therefore be USD29,760.
In locations where the amount has increased from the amount in 2013, the Notice also allows taxpayers who incurred housing expenses in 2013 to elect to apply the 2014 tax year limitation amount to the 2013 tax year.
