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liz, a U.S. citizen living in Rome, Italy, for the last two and one half years,...

liz, a U.S. citizen living in Rome, Italy, for the last two and one half years, earns a salary of $140,000 in 2020. liz's housing costs are $26,000 per year, which is reasonable. How much can liz exclude from income?

A) $104,100

B) $112,444

C) $116,384

D) $125,000

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Answer #1

Answer :

Total exclusion from income = Foreign earned income exclusion = Foreign housing exclusion for 2020

Foreign earned income exclusion for 2020 is $107600

Foreign housing exclusion for 2020 = Foreign housing expenses for the year - base housing amount.

Foreign housing expenses for the year 2020 = $26000

Base housing amount for the year 2020 = 16% of foreign earned income exclusion for 2020 = $107600*.16 = $17216

Foreign housing exclusion for 2020 = $26000 - $17216 = $8784

Total exclusion from income = $107600 + $8784 = $116384

The correct answer is option (c) $116,384

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