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Dave CPA
Dave CPA, Accountant
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I received per diem payments from my employer while I was out

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I received per diem payments from my employer while I was out of US for foreign assignment. I qualify for foreign income exclusion under Physical presence test. Per diem payments are not reported on my W2. Can I claim foreign housing exclusion and deduct my actual housing rental expenses incurred at foreign location.

Welcome to Just Answer,

The answer would be yes if you paid for the housing out of your own pocket. If the per diem was to pay for housing, then you haven't incurred any actual expense which would be deductible.

General Rule to qualify for the foreign housing exclusion or deduction, you must:
- Be a U.S. citizen or resident alien (for federal tax purposes),
- Have foreign earned income (income received for working in a foreign country),
- Have a tax home in a foreign country,
- Meet either the bona fide residence test or the physical presence test, and
- Have paid (or incurred) foreign housing expenses.

Below is a link to the IRS with more information. Please let me know if you have any questions before you rate my answer. A positive rating is what I strive for. Regards Dave
Customer: replied 3 years ago.

The per diem rate I received was the one reported by US department of state for the location I resided. It covers, meals, incidental expenses and lodging and all other expenses. I paid my rents and living expenses out of this per diem. So if I understand correctly, since I paid them from per diem payments I received, I have not incurred them so I cannot claim that as deduction

That is correct the per diem covered your rent, so you incurred no personal cost and the deduction is not allowed. Regards Dave
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