FEIE Housing Exclusion 2026 Overseas Rent Calculator

The Foreign Earned Income Exclusion housing benefit lets qualifying US expats exclude (employees) or deduct (self-employed) foreign housing costs above a base amount. For 2026, the base is $21,664 (16% of the $135,400 FEIE limit) and the standard cap is 30% of FEIE ($40,620). High-cost cities like Hong Kong, London, and Geneva get city-specific caps of up to $118,200 published in IRS Rev. Proc. 2025-32 under IRC §911(c).

How the FEIE Housing Benefit Works

You first add all qualifying housing expenses — rent, utilities (except phone and internet TV), property insurance, parking, occupancy taxes, household repairs. From that total, you subtract the housing base of $21,664. Whatever remains, capped at the city-specific limit, is your housing amount. Employees take it as an exclusion on Form 2555 Part VI, reducing taxable wages. Self-employed taxpayers take it as a deduction on Schedule 1, but still pay self-employment tax on the full amount.

Exclusion vs Deduction — Why W-2 Wins

The exclusion (W-2) removes housing from the income tax base entirely. The deduction (self-employed) only reduces taxable income — and self-employment tax (15.3%) is still owed on the deducted amount. A self-employed expat in Singapore paying $60,000 rent might save 25-30% less tax than a W-2 employee with identical housing. Plan structure matters: if you can structure as a foreign company employee or work through a contractor entity that pays W-2 wages, the exclusion path is materially better.

2026 High-Cost City Caps and Qualifying Periods

The IRS publishes city-specific caps every fall in Rev. Proc. announcements. For 2026 (Rev. Proc. 2025-32), top caps include Hong Kong $116,700, Geneva $118,200, Paris $115,400, London $114,300, Tokyo $89,500. Standard cap for non-listed cities is $36,100. You must qualify under the bona fide residence test (full tax year abroad) or physical presence test (330 days in any 12-month period). Partial-year qualifiers prorate everything — base, cap, exclusion — by qualifying days ÷ 365.

Common FEIE Housing Mistakes

(1) Including ineligible costs — domestic help, purchased furniture, depreciation, mortgage interest, and TV subscriptions don't qualify. (2) Forgetting the base subtraction — you cannot exclude the first $21,664, only the excess. (3) Not prorating — leaving the country mid-year means proration; missing it triggers IRS notice. (4) Using the wrong city cap — check the most recent Rev. Proc. ZIP-level list, not a friend's number from three years ago. (5) Self-employed taxpayers confusing SE tax — housing deduction does NOT reduce SE tax. Always cite IRC §911(c) and the current Rev. Proc. in your Form 2555 work papers.

Last updated May 2026. Sources cited in tool output.