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IRS ANNOUNCES BREAK FOR AMERICANS OVERSEAS
October 09, 2006
U.S. workers overseas got an unwelcome surprise this spring when Congress retroactively increased their taxes. The U.S. Treasury tried to take a little sting out of the increase this weekend by increasing the exclusion for housing costs for Americans working in other countries.
The "Tax Increase Prevention Act" capped the amount of housing allowance that overseas workers can exclude from US income. It also changed the rules so that the exclusion for income earned overseas applies first against a taxpayer's lowest brackets, rather than the highest brackets.
This provision apparently was inserted into the bill at the last minute, and like many hasty decisions is having unintended consequences - like making it more attractive for multinationals to hire Europeans than Americans.
The IRS released Notice 2006-87 over the weekend to increase the housing exclusion for Americans in high-cost overseas postings.
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