Guide to Global Payroll Management - 2020 - D-153

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Appendix D--Federal Forms and Instructions

amount you claimed. To do this, file Form
1040-X.

Line 20. If you engaged in an
unincorporated trade or business in which
both personal services and capital were
material income-producing factors, a
reasonable amount of compensation for
your personal services will be considered
earned income. The amount treated as
earned income, however, can't be more
than 30% of your share of the net profits
from the trade or business after
subtracting the deduction for the
employer-equivalent portion of
self-employment tax.
If capital is not an income-producing
factor and personal services produced the
business income, the 30% rule does not
apply. Your entire gross income is earned
income.
Line 23. List other foreign earned
income not included on lines 19 through
22. You can write "Various" on the dotted
lines to the left of the entry space if you
have other foreign earned income from
multiple sources.

Line 25. Enter the value of meals and/or
lodging provided by, or on behalf of, your
employer that is excludable from your
income under section 119. To be
excludable, the meals and lodging must
have been provided for your employer's
convenience and on your employer's
business premises. In addition, you must
have been required to accept the lodging
as a condition of your employment. If you
lived in a camp provided by, or on behalf
of, your employer, the camp may be
considered part of your employer's
business premises. See Exclusion of
Meals and Lodging in Pub. 54 for details.

Part VI

Line 28. Enter the total reasonable
expenses paid or incurred during the tax
year by you, or on your behalf, for your
foreign housing and the housing of your
spouse and dependents if they lived with
you. You can also include the reasonable
expenses of a second foreign household
(defined later). Housing expenses are
considered reasonable to the extent they
aren't lavish or extravagant under the
circumstances.
Housing expenses include rent, utilities
(other than telephone charges), real and
personal property insurance,
nonrefundable fees paid to obtain a lease,
rental of furniture and accessories,
residential parking, and household
repairs. You can also include the fair rental
value of housing provided by, or on behalf
of, your employer if you haven't excluded it
on line 25.
Don't include deductible interest and
taxes, any amount deductible by a
tenant-stockholder in connection with

cooperative housing, the cost of buying or
improving a house, principal payments on
a mortgage, or depreciation on the house.
Also, don't include the cost of domestic
labor, pay television, or the cost of buying
furniture or accessories.
Include expenses for housing only
during periods for which:
* The value of your housing isn't
excluded from gross income under section
119 (unless you maintained a second
foreign household as defined later), and
* You meet the tax home test and either
the bona fide residence or physical
presence test.
Second foreign household. If you
maintained a separate foreign household
for your spouse and dependents at a
place other than your tax home because
the living conditions at your tax home were
dangerous, unhealthful, or otherwise
adverse, you can include the expenses of
the second household on line 28.
Married couples. The following rules
apply if both you and your spouse qualify
for the tax benefits of Form 2555.

Same foreign household. If you and
your spouse lived in the same foreign
household and file a joint return, you must
figure your housing amounts (line 33)
jointly. If you file separate returns, only
one spouse can claim the housing
exclusion or deduction.
In figuring your housing amount jointly,
either spouse (but not both) can claim the
housing exclusion or housing deduction.
However, if you and your spouse have
different periods of residence or presence,
and the one with the shorter period of
residence or presence claims the
exclusion or deduction, you can claim as
housing expenses only the expenses for
that shorter period. The spouse claiming
the exclusion or deduction can aggregate
the housing expenses of both spouses,
subject to the limit on housing expenses
(line 29b), and subtract his or her base
housing amount.
Separate foreign households. If you
and your spouse lived in separate foreign
households, you each can claim qualified
expenses for your own household only if:
* Your tax homes weren't within a
reasonable commuting distance of each
other, and
* Each spouse's household wasn't within
a reasonable commuting distance of the
other spouse's tax home.
Otherwise, only one spouse can claim
his or her housing exclusion or deduction.
This is true even if you and your spouse
file separate returns.
See Pub. 54 for additional information.
Line 29a. Enter the city or other location
(if applicable) and the country where you
incurred foreign housing expenses during
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the tax year only if your location is listed in
the table at the end of the instructions;
otherwise, leave this line blank.

Line 29b. 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. In 2019, for most locations, this
limit is $31,770 (30% of $105,900) if your
qualifying period includes all of 2019 (or
$87.04 per day if the number of days in
your qualifying period that fall within your
2019 tax year is less than 365).
The table at the end of the instructions
lists the housing expense limits based on
geographic differences in foreign housing
costs relative to housing costs in the
United States. If the location in which you
incurred housing expenses is listed in the
table, or the number of days in your
qualifying period that fall within the 2019
tax year is less than 365, use the Limit on
Housing Expenses Worksheet, later, to
figure the amount to enter on line 29b. If
the location in which you incurred housing
expenses is not listed in the table, and the
number of days in your qualifying period is
365, enter $31,770 on line 29b.

Example. For 2019, because your
location is not listed in the table at the end
of the instructions, your limit on housing
expenses is $87.04 per day. If you file a
calendar year return and your qualifying
period is January 1, 2019, to October 3,
2019 (276 days), you would enter $24,023
on line 29b ($87.04 multiplied by 276
days).
Election to apply higher limit on
housing expenses. For 2018, you could
elect to apply the 2019 limits on housing
expenses as discussed in section 4 of
Notice 2019-24 available at IRS.gov/IRB/
2019-14_IRB#NOT-2019-24.
The IRS and the Treasury Department
anticipate that you will also be allowed to
make an election to apply the 2020 limits
to figure your 2019 limit on housing
expenses. The authorization to make the
election will be provided in a future annual
notice published in the Internal Revenue
Bulletin.
More than one foreign location. If
you moved during the 2019 tax year and
incurred housing expenses in more than
one foreign location as a result, complete
the Limit on Housing Expenses
Worksheet, later, for each location in
which you incurred housing expenses,
entering the number of qualifying days
during which you lived in the applicable
location on line 1. Add the results shown
on line 4 of each worksheet, and enter the
total on line 29b.

CAUTION

If you moved during the 2019 tax
year and are completing more
than one Limit on Housing

Instructions for Form 2555 (2019)

D-153

Guide to Global Payroll Management - 2020

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