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We prepare most type of tax returns:

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S Corporation.

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Partnership.

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Amended.

Gary Bode, CPA is a Master's Degreed, nation wide accountant offering tax and business services. Member of AICPA and NCACPA. Our virtual office provides excellent service to long distance and international clients. Call (910) 399-2705 for a free phone consult.

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Client Testimonials

My husband and I had to deal with canceled debt from a Deed in Lieu of Foreclosure on a second home with our 2012 taxes. We never had to deal with this type of tax experience and needless to say, we were fearful. Owing taxes on possible additional income was stressful. We searched for CPA’s as well as info about DILs and how Insolvency worked. When we came across Gary’s website, we were impressed. We found his website 8 months prior to tax season. We kept it as a “Favorite” as we knew we would need to contact him for assistance. When it was time to get a CPA, we called Gary. We felt relieved that we actually had someone that not only understood our concerns but was an expert in this area. He walked us through the process and all the time telling us not to worry. When our taxes were completed, you cannot imagine the relief we had when we actually were able to get a refund.

Gary is a dedicated professional and attentive to his clients. We love the virtual office as it is convenient during tax time and he’s fees were fair and affordable when you consider the depth of work accomplished on our taxes!

We’ve already started recommending Gary to others. We are so blessed and grateful for all that Gary did to assist with our taxes.

 

Patty and Tim, Fredericksburg, VA

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Even though Gary enjoys helping colleagues, we no longer provide free consults to other tax preparers. He's happy to consult on an hourly billing basis if our schedule allows.

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ExPat CPA compares the Foreign Housing Deduction and Foreign Housing Exclusion on Form 2555 | IRS Publication 54 Tax Guide for U.S. Citizens and Resident Aliens Abroad

IRS Form 2555

Sometimes new tax Clients didn’t take advantage of the foreign housing section of Form 2555 in prior tax years. You can amend those back returns if they generate refunds.

IRS Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad and Form 2555, Foreign Earned Income.

Hello, I’m Gary Bode, an expat CPA with a virtual office for international clients. Most questions I hear about Form 2555, Foreign Earned Income, concern the Foreign Housing Deduction and Foreign Housing Exclusion. So here are the basics of the foreign housing deduction. Most Clients say the Form 2555 instructions and IRS Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad, are hard to read.

Similarities of the Foreign Housing Exclusion and Foreign Housing Deduction

To qualify for the foreign housing exclusion or deduction, you must:

  • Be a U.S. citizen or resident alien (for federal tax purposes).
  • Have foreign earned income (income received for working in a foreign country).
  • Have a tax home in a foreign country.
  • Meet either the bona fide residence test or the physical presence test. We don’t cover test parameters in this post.
  • Have paid (or incurred) foreign housing expenses. These are described below.
  • Both are reported on Form 2555, Foreign Earned Income, the most common expat IRS document.

The maximum exclusion and deduction amounts for 2013 is $15,616, but can be limited by multiple constraints on Form 2555.

Differences between the Foreign Housing Exclusion and Foreign Housing Deduction

Self-employed folks must use the Foreign Housing Deduction. Self-employed folks can’t use the exclusion. While similar, the exclusion and deduction require different tax treatment. There is a distinction between employed and self-employed; see below.

What is Self Employment Income?

Self-employed folks include:

  • Sole Proprietors. You run your own business and file Schedule C with Form 1040 as the company’s tax return. You are self-employed, even if your company pays you as an employee and files US payroll tax Form 941.
  • Single Member LLCs, again filing Schedule C as above.
  • Partners in a Partnership.

Sources of Information on the foreign house exclusion and foreign housing deduction

  • Form 2555 instructions.
  • IRS Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad.
  • Tax research software. Maybe your local University subscribes to one?
  • The IRS website.

Tax Mechanics of Form 2555 and the Foreign Housing Deduction

The housing deduction is calculated on Form 2555 Part VI and IX. The deduction flows to Line 36 on Form 1040. Print “Form 2555” on the dotted lines next to the line.

Form 2555 EZ or Form 2555

I think most expat CPAs file form 2555, even if the client qualifies to file Form 2555 EZ.

Qualifying Expenses for the Foreign Housing Deduction

The following expenses qualify for the foreign housing exclusion:

  • Rent.
  • Repairs.
  • Utilities, but not telephone expense.
  • Real property and personal property insurance (homeowners & renters insurance).
  • Occupancy taxes.
  • Nonrefundable security deposits or lease payments.
  • Furniture rental.
  • Residential parking fees.

I’m an Expat CPA who prepares:

  • Form 2555
  • Form 5471
  • Form 1116
  • Form 3520
  • FBAR

Our virtual office makes tax time easy and secure for our international clients. We have hundreds of postings on this site, many on expat issues, to help you eval our experience and attitude. For a free initial phone consult, call (910) 399-2705.

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