Housing Cost Amount Limitations for Foreign Earned Income Exclusion 2026

Part III - Administrative, Procedural, and Miscellaneous Determination of Housing Cost Amounts Eligible for Exclusion or Deduction for 2026 Notice 2026-25 SECTION 1. PURPOSE This notice provides adjustments to the limitation on housing expenses for purposes of section 911 of the Internal Revenue Code for specific locations for 2026. These adjustments are based on geographic differences in housing costs relative to housing costs in the United States. SECTION 2. BACKGROUND Section 911 allows a qualified individual to elect to exclude from gross income the foreign earned income and to exclude or deduct the housing cost amount of such individual. The term "housing cost amount" is generally the total of the housing expenses for the taxable year minus a base housing amount. See § 911(c)(1). For this purpose, the base housing amount for the taxable year is limited to an amount that is tied to the

maximum foreign earned income exclusion amount of the qualified individual, which is $132,900 for 2026. See § 911(c)(1)(B). Specifically, the base housing amount is 16 percent of the maximum foreign earned income exclusion amount (computed on a daily basis), multiplied by the number of days in the applicable period that fall within the taxable year. Assuming that the entire taxable year of a qualified individual is within the applicable period, the base housing amount for 2026 is $21,264 ($132,900 x .16). Similarly, the housing expense amount is also limited, based on a percentage of the maximum foreign earned income exclusion amount. Specifically, the limit on such housing expenses generally equals 30 percent of the maximum foreign earned income exclusion amount (computed on a daily basis), multiplied by the number of days in the applicable period for which the taxpayer is a qualified individual. See § 911(c)(2)(A) and (d)(1). Thus, under this general limitation, a qualified individual whose entire taxable year is within the applicable period is limited to maximum housing expenses of $39,870 ($132,900 x .30) for 2026. However, section 911(c)(2)(B) authorizes the Secretary to issue regulations or other guidance to adjust the percentage under section 911(c)(2)(A)(i) (which determines the limit on housing expenses) based on geographic differences in housing costs relative to housing costs in the United States. Pursuant to this authority, the Department of the Treasury (Treasury Department) and the Internal Revenue Service (IRS) have published annual notices concerning the limitation on the section 911 housing cost amounts since the 2006 taxable year. For more background on the foreign housing exclusion, see https://www.irs.gov/individuals/international-taxpayers/foreign-housing-exclusion-or- deduction.

SECTION 3. TABLE OF ADJUSTED HOUSING LIMITATIONS FOR 2026 The following table provides adjusted limitations on housing expenses (in lieu of the otherwise applicable limitation of $39,870) for 2026. All amounts are in U.S. dollars.

Housing Expenses Housing Expenses

Limitation on Limitation on LOCATION(S) COUNTRY

France Garches, Paris, Sevres, Germany Boeblingen, Ludwigsburg, 73,600 201.64 46,100 126.30 Australia Sydney Bahrain Bahrain Brazil Sao Paulo Canada Ottawa Canada Victoria China Hong Kong Colombia All cities other than Bogota Denmark Copenhagen France Lyon 114,300 65,600 179.73 56,600 155.07 50,800 139.18 45,800 125.48 313.15 49,400 135.34 43,704 119.74 40,700 111.51 Aruba All cities Australia Melbourne Australia Wollongong Bahamas, The Nassau Belgium Brussels Bermuda Bermuda Canada Calgary Canada Montreal Canada Toronto Canada Vancouver Cayman Islands Grand Cayman China Beijing China Shanghai Colombia Bogota Curacao Curacao Democratic Republic of the Congo Kinshasa Dominican Republic Santo Domingo Estonia Tallinn Germany Berlin 46,200 126.58 40,600 111.23 46,000 123.06 42,900 117.53 90,000 246.58 45,100 123.56 52,000 142.47 62,700 171.78 73,400 201.10 64,193 175.87 69,000 189.04 57,001 156.17 58,700 160.82 45,800 125.48 42,000 115.07 45,500 124.66 46,600 127.67 44,100 120.82 Argentina Buenos Aires 56,500 154.79 Angola Luanda Suresnes, and Versailles Nellingen, and Stuttgart 49,700 136.16 48,300 132.33 84,000 230.14 (full year) (daily)

Pirmasens, Sembach, and

Germany Kaiserslautern, Landkreis, 48,100 131.78 57,700 158.08 Germany Garmisch-Partenkirchen and Kuwait All cities other than Kuwait 40,700 111.51 57,900 158.63 Germany Cologne Germany Bonn and Wahn Germany Gelnhausen and Hanau Germany Germany Mainz and Wiesbaden Guatemala Guatemala City Guinea Conakry Holy See, The Holy See, The India Mumbai India New Delhi Ireland Dublin Israel Beer Sheva Israel Jerusalem and West Bank Israel Tel Aviv Italy Genoa Italy La Spezia Italy Milan Italy Naples Italy Rome Italy Vicenza Jamaica Kingston Japan Gifu, Komaki, and Nagoya Japan Okinawa Prefecture Japan Osaka-Kobe Japan Tokyo City Kazakhstan Almaty Kuwait Kuwait City Luxembourg Luxembourg Malaysia Kuala Lumpur Malta Malta Mexico Mexico City Netherlands Amsterdam and Schiphol Netherlands The Hague Oman Muscat Poland Krakow Poland Warsaw Portugal Alverca and Lisbon Qatar Doha 42,000 115.07 45,500 124.66 51,500 141.10 50,400 138.08 42,000 115.07 51,300 140.55 49,000 134.25 67,920 186.08 56,124 153.76 42,600 116.71 61,800 169.32 49,000 134.25 50,800 139.18 41,800 114.52 40,400 110.68 73,200 200.55 50,300 137.81 49,000 134.25 40,900 112.05 41,200 112.88 74,300 203.56 41,300 113.15 90,664 248.39 67,300 184.38 48,000 131.51 64,400 176.44 46,200 126.58 55,100 150.96 47,900 131.23 52,900 144.93 58,400 160.00 41,300 113.15 54,900 150.41 62,300 170.68 44,800 122.74 45,888 125.72 Ingolstadt and Munich 56,200 Oberammergau Zweibrucken City 153.97

Aldermaston, Belfast, Birmingham, Bristol, Brough, Cambridge, Chelmsford, Chicksands, Dunstable, Edinburgh, Edzell, Fairford, United Kingdom All cities* other than 44,200 121.10 Felixstowe, Ft. Halstead, Glenrothes, Gloucestershire, Greenham Common, Hythe, Kemble, Liverpool,

South Korea Camp Colbern and Camp South Korea K-16, Kimpo Airfield, Seoul, United Kingdom Bracknell, High Wycombe, 54,200 148.49 44,300 121.37 62,100 170.14 45,000 123.29 44,616 122.24 Russia Moscow Singapore Singapore Spain Madrid Switzerland Zurich Thailand Bangkok United Arab Emirates Abu Dhabi United Kingdom Bath United Kingdom Croughton United Kingdom Harrogate and Menwith Hill United Kingdom Surrey 108,000 295.89 86,700 237.53 59,700 163.56 67,218 184.16 59,000 161.64 49,687 136.13 41,000 112.33 46,600 127.67 48,402 132.61 Romania Bucharest Russia Saint Petersburg Saudi Arabia Riyadh Slovenia Ljubljana Spain Barcelona Switzerland Bern Switzerland Geneva Taiwan Taipei Tanzania Dar Es Salaam Trinidad and Tobago Port of Spain Ukraine Kiev United Arab Emirates Dubai United Kingdom Basingstoke United Kingdom Caversham United Kingdom Cheltenham United Kingdom Farnborough United Kingdom Gibraltar United Kingdom London United Kingdom Loudwater 116,900 41,200 112.88 60,000 164.38 40,000 109.59 51,400 140.82 40,600 111.23 82,200 224.66 320.27 46,188 126.54 44,000 120.55 54,500 149.32 72,000 197.26 57,174 156.64 41,099 112.60 73,800 202.19 54,300 148.77 54,700 149.86 68,600 187.95 57,400 157.26 Mercer and Suwon and Reading Nottingham, Oxfordshire,

Rochester, Waterbeach,

Welford, West Byfleet, and

Wiltshire, which are subject to the generally applicable limitation *Excluding those cities

SECTION 4. OPTION TO APPLY 2026 ADJUSTED HOUSING LIMITATIONS TO 2025 TAXABLE YEAR For some locations, the limitation on housing expenses provided in Section 3 of this notice may be higher than the limitation on housing expenses provided in the "Table of Adjusted Limitations for 2025" in Notice 2025-16, 2025-13 I.R.B. 1378. A qualified individual incurring housing expenses in such a location during 2025 may apply the adjusted limitation on housing expenses provided in Section 3 of this notice for 2026 in lieu of the amounts provided in the "Table of Adjusted Limitations for 2025" in Notice 2025-16 (and as set forth in the Instructions to Form 2555, Foreign Earned Income, for 2025). The Treasury Department and the IRS anticipate that future annual notices providing adjustments to housing expense limitations will make a similar option available to qualified individuals that incur housing expenses in the immediately preceding year. For example, when adjusted housing expense limitations for 2027 are issued, it is expected that taxpayers will be permitted to apply those adjusted limitations Plymouth, Portsmouth, to the 2026 taxable year.

Venezuela Caracas 57,000 156.16 Vietnam Hanoi Vietnam Ho Chi Minh City 46,800 128.22 42,000 115.07 previously listed

SECTION 5. EFFECT ON OTHER DOCUMENTS This notice supersedes Notice 2025-16, 2025-13 I.R.B. 1378. SECTION 6. EFFECTIVE DATE This notice is effective for taxable years beginning on or after January 1, 2026. However, as provided in section 4 of this notice, taxpayers may apply the 2026 adjusted housing expense limitations contained in section 3 of this notice to the taxable year beginning in 2025. SECTION 7. DRAFTING INFORMATION The principal author of this notice is Kate Y. Hwa of the Office of Associate Chief Counsel (International). For further information regarding this notice, contact Ms. Hwa at (202) 317-5001 (not a toll-free call).