Can I claim Foreign Housing Exclusion for 2018 if I last claimed it in 2013, but have filed the simplified 2555-EZ for 2014-2017?

[keshav-dani]

I ask because TurboTax says not taking the exclusion when eligible amounts to revoking it. A revoked exclusion cannot then be taken for 5 yrs. (or requires an IRS appeal). So does filing a 2555-EZ amount to revoking the FHE, since FHE is not included on the simplied EZ version of 2555.

[PhyllisG]

You are correct. The Form 2555-EZ is only used to claim the foreign earned income exclusion.  If the foreign housing exclusion was never used on the initial Form 2555 then it is not revoked. You have to invoke an exclusion before it is revoked. However, you have indicated that you did claim the exclusion on your 2013 tax return; therefore, it is considered revoked for subsequent years within a 5 year period.

You will have to wait until the 6th year to invoke the foreign housing exclusion again, or you can request permission from the Internal Revenue Service that will result in substantial fees.

It is recommended that in future years, you continue to use the foreign housing exclusion even if the amount results in -0-. Doing this will not take away from your income exclusion, but it will prevent you from automatically revoking the foreign housing exclusion.

Thank you for the follow-up. I will edit my previous response.
 

[keshav-dani]

UPDATE: I spoke to IRS about this issue. The agent said that filing 2555-EZ did NOT constitute a revocation of the Foreign Housing Exclusion. He was clear that I could take the Foreign Housing Exclusion in 2018, even though I had last taken the FHE in 2013 by filling the 2555, while in subsequent years, I had only filed 2555-EZ (without formally revoking the FHE). He said that in general, filing a simpler version of the form should not (and would not) constitute an (accidental) revocation.

[PhyllisG]

Hmm. That's interesting.  My research revealed that the Form 2555-EZ will not revoke the foreign earned income exclusion. However, if either one is invoked and not elected in subsequent years, then it is considered revoked.  Of course, you did not revoke the income exclusion by filing the Form 2555-EZ.  I will do additional research to clarify the housing exclusion.

In the meantime, I suggest that you keep the name and badge number of the representative who provided the answer in case you are question on the reliance of the guidance.

[PhyllisG]

You are correct. The Form 2555-EZ is only used to claim the foreign earned income exclusion.  If the foreign housing exclusion was never used on the initial Form 2555 then it is not revoked. You have to invoke an exclusion before it is revoked. However, you have indicated that you did claim the exclusion on your 2013 tax return; therefore, it is considered revoked for subsequent years within a 5 year period. 

You will have to wait until the 6th year to invoke the foreign housing exclusion again, or you can request permission from the Internal Revenue Service that will result in substantial fees.

It is recommended that in future years, you continue to use the foreign housing exclusion even if the amount results in -0-. Doing this will not take away from your income exclusion, but it will prevent you from automatically revoking the foreign housing exclusion.

[Edited 03.24.19 | 1:06 PM]