Determination of Housing Cost Amounts Eligible for Exclusion or Deduction for 2007
Notice 2007-77 (10/1/2007)
SECTION 1. PURPOSE
This notice provides adjustments to the limitation on housing expenses for purposes of section 911 of the Internal Revenue Code (Code) for specific locations for 2007. These adjustments are made on the basis of geographic differences in housing costs relative to housing costs in the United States.
SECTION 2. BACKGROUND
Section 911(a) of the Code allows a qualified individual to elect to exclude from gross income the foreign earned income and housing cost amount of such individual. Section 911(c)(1) defines the term "housing cost amount" as an amount equal to the excess of (A) the housing expenses of an individual for the taxable year to the extent such expenses do not exceed the amount determined under section 911(c)(2), over (B) 16 percent of the exclusion amount(computed on a daily basis) in effect under section 911(b)(2)(D) for the calendar year in which such taxable year begins ($70.44 per day for 2007, or $85,700 for the full year), multiplied by the number of days of that taxable year within the applicable period described in section 911(d)(1). The applicable period is the period during which the individual meets the tax home requirement of section 911(d)(1)and either the bona fide residence requirement of section 911(d)(1)(A)or the physical presence requirement of section 911(d)(1)(B). Assuming that the entire taxable year of a qualified individual is within the applicable period, the section 911(c)(1)(B) amount for 2007 is $13,712($85,700 x .16).