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Domestic Corporate Taxation

Corporate Employee: Housing

Employees can be reimbursed directly or indirectly (which includes services provided in kind) for moving expenses. Deductible moving expenses only include the reasonable expenses of moving household goods and personal effects and traveling (including lodging) from the former home to the new home.

Employees can be given lodging by an employer if it is provided on the business premises, if it is provided for the employer's convenience and if the employee accepts it as a condition of employment.

Generally, U.S. citizens and residents aliens living abroad are taxed on their worldwide income. However, employees working abroad may qualify for the foreign earned income and foreign housing exclusions and the foreign housing deduction if they meet certain requirements.

To claim the foreign earned income exclusion, the foreign housing exclusion, or the foreign housing deduction, all three of the following requirements must be met:

  1. Your tax home must be in a foreign country.
  2. You must have foreign earned income.
  3. You must be one of the following.
    1. A U.S. citizen who is a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax year.
    2. A U.S. resident alien who is a citizen or national of a country with which the United States has an income tax treaty in effect and who is a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax year.
    3. A U.S. citizen or a U.S. resident alien who is physically present in a foreign country or countries for at least 330 full days during any period of 12 consecutive months.

For 2014, the maximum foreign earned income exclusion is $99,200 per qualifying person; for 2013 it was $97,600.

In addition to the foreign earned income exclusion, an exclusion or a deduction from gross income for housing costs can be claimed if the individual’s tax home is in a foreign country and they qualify for the exclusions and deduction under either the bona fide residence test or the physical presence test.

The housing exclusion applies only to amounts considered paid for with employer- 

provided amounts. The housing deduction applies only to amounts paid for with self-employment earnings.

The housing amount is the total of an individual’s housing expenses for the year minus the base housing amount.

The computation of the base housing amount is tied to the maximum foreign earned income exclusion. The amount is 16% of the exclusion amount (computed on a daily basis), multiplied by the number of days in the qualifying period that fall within the tax year.

For 2014, the maximum foreign earned income exclusion is $99,600 per year; 16% of this amount is $15,872, of $43.48 per day. To figure base housing amount for a calendar-year taxpayer, multiply $43.48 by the number of qualifying days during 2014. Subtract the result from total housing expenses (up to the applicable limit) to find the housing amount.

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U.S. Tax Treaty Developments

Treaty Update: United States - Isle of Man
30 July, 2014
An amendment to the 2002 tax information exchange agreement between the Isle of Man and the United States entered into force on July 1, 2014.
Treaty Update: United States - Hong Kong
30 June, 2014
The tax information exchange agreement between the United States and Hong Kong entered into force on June 20, 2014.
Treaty Update: United States - Poland
27 May, 2014
A DTA signed between the United States and Poland was forwarded to the United States's Senate as part of the nation's domestic ratification procedures on May 20, 2014.
Treaty Update: United States - Switzerland
27 May, 2014
A vote to expedite domestic ratification procedures in the US with respect to the DTA Protocol signed with Switzerland failed on May 22, 2014, as a result of a block by Senator Rand Paul in the US Senate.
Treaty Update: United States - Spain
12 May, 2014
US President Barack Obama has forwarded the DTA Protocol signed with Spain to the nation's Senate for ratification. The pact would update the two nations' 1990 DTA.
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