Exclude foreign housing expenses.

In addition to receiving the foreign earned income exclusion, if you live and work outside of the United States, you can exclude amounts paid by your employer for certain housing expenses, whether they are paid directly to you or on your behalf.

As with the foreign earned income exclusion, you must meet the requirements of the bona fide resident or physical presence tests in order to qualify for the housing exclusion. There are a bevy of expenses which qualify for the housing exclusion, such as rent (including rented furniture), repairs, insurance, security deposits, and utilities other than telephone. On the other hand there are expenses which are not excluded from income, particularly those that are considered lavish or those that could be deductible on other areas of your U.S. tax return. Some non-qualifying expenses include deductible mortgage interest, property taxes, costs associated with buying property, domestic labor, improvements, purchased furniture and cable television.

The maximum housing exclusion for 2015 is $16,128 (16% of the foreign earned income exclusion).