What is the foreign housing exclusion or deduction? Do I qualify?

In addition to the foreign earned income exclusion, you can also claim an exclusion or a deduction from gross income for your housing amount if your tax home is in a foreign country and you 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, which includes any amounts paid to you or paid or incurred on your behalf by your employer, which must be taxable foreign earned income to you for the year (without regard to the foreign earned income exclusion). The housing deduction applies only to amounts paid for with self-employment earnings.

Your housing expenses may not exceed a certain limit. The limit on housing expenses varies, depending upon the location in which you incur housing expenses. The limit on housing expenses is computed using the worksheet on page 3 of the Instructions for Form 2555.