United States – IRS Releases 2026 Section 911 Housing Cost Limitations

Background

I.R.C. section 911 permits qualifying individuals whose tax home is in a foreign country, and who meet specific requirements as to residence or presence in a foreign country, to elect to exclude certain amounts of foreign earned income and foreign housing costs for purposes of their U.S. federal income tax. The foreign earned income exclusion amount is indexed annually and the maximum amount for 2026 is $132,900. The housing cost exclusion generally is equal to the foreign housing expenses of the taxpayer to the extent they exceed a base amount equal to 16 percent of the foreign earned income exclusion (thus, $21,264 for 2026), subject to a limitation equal to 30 percent of the foreign earned income exclusion (thus, $39,870 for 2026). However, for certain foreign locations with high housing costs the 30-percent limitation can be adjusted by the U.S. Department of the Treasury.

Notice 2026-25

The 2026 notice includes a table that identifies locations within foreign countries with high housing costs relative to the housing costs in the United States. The table sets out adjusted limitation amounts for the excludible housing expenses for individuals who qualify to claim the section 911 exclusions for 2026. Thus, a qualified individual incurring housing expenses in one or more of the high-cost locations identified in the table may use the adjusted limitation provided (in lieu of the statutory amount of $39,870) in determining the excludible housing cost amount. A qualified individual who incurs housing expenses in a locality other than one of those listed in the table is subject to the statutory housing expense limitation of $39,870 for 2026.

Notable Changes

Of the 137 locations listed in the 2026 notice, 60 show an increase in the limitation amount compared with 2025, 71 show no change, and only 6 show a decrease. This contrasts with the 2025 notice, which showed only 17 locations with an increase, 79 with no change, and 50 with a decrease.

The location with the highest limitation this year is Geneva, where the limitation increased by $14,300 to $116,900. Hong Kong follows as the second highest and the limitation remains unchanged at $114,300. Moscow has the third highest limitation and is also unchanged, with $108,000 as the limitation.

Zurich has the largest increase for 2026. The limitation increased by $27,999 to $67,218. Vancouver and the Grand Cayman Islands both increased by over $16,000 to $73,400 and $64,193, respectively. In addition, Krakow is new to the list for 2026 with a limitation of $54,900. Please see the following chart for notable increases in 2026. 

The six locations with a decrease in the limitation were in Korea and Japan; however, the decreases were minor (less than $500).

Among other locations where it is common for U.S. assignees to claim the section 911 exclusions, the amounts for Kuwait City, Kuala Lumpur, Doha, Abu Dhabi, and Dubai all remain unchanged, whereas the amount for Singapore increased by $3,800 to $86,700. A number of these locations may also have the time requirements waived to qualify for the foreign earned income exclusion due to the war in the Middle East; however, the IRS likely won’t announce these updates until 2027. 

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