According to section 911(a) of the federal tax code, a qualified individual under either the bona fide residence test or the physical presence test will be able to exclude from the gross income the housing amount in a foreign country provided for by the employer.
An exception to this rule would be if a second foreign household is maintained for the spouse and dependents due certain adverse and unhealthful conditions such as warfare or civil unrest.
There is also a limit on the amount of housing expenses one can incur, usually around 30% of the FEI exclusion times the number of days in the qualifying period, usually about $27,450 a year.
The result is then multiplied by the number of days in the qualifying period that fall within the tax year.
For 2015, if the maximum foreign earned income exclusion is $100,800, eligible housing expenses for the year would be limited to $30,240 (30% of $100,800).
In defining the base amount, section 911(c)(1)(B)(iii) of the federal tax code states that the amount is equal to 16% of the maximum foreign earned income exclusion multiplied by the number of qualifying days within the tax year.
Secondly, if housing amounts are to be excluded, this must be calculated first before the foreign earned income exclusion can be determined.