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TAX MATTERS

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July 2013

Tokyo, Hong Kong Again Top IRS High-Cost Housing List

Housing CostTokyo and Hong Kong have the highest allowable housing costs for 2013 for purposes of the foreign housing exclusion under Sec. 911(c). The limitation for Tokyo is $320.82 per day, or $117,100 for the year. For Hong Kong, it is $313.15 a day, or $114,300 for the year. The cities are followed, in order, by Moscow; Geneva; Osaka-Kobe, Japan; and Singapore (see chart).

The cities are among 288 places the IRS identified in Notice 2013-31, an annual update, as having allowable foreign housing exclusions above the otherwise applicable limitation for 2013 of $29,280. The top five high-cost cities are the same as in the 2012 list (see Notice 2012-19).

Subject to limitations, qualified individual taxpayers may elect to exclude from gross income under Sec. 911(a) their foreign earned income and foreign housing costs. The individual must meet the bona fide residence or physical presence test. The income exclusion and housing cost exclusion together may not exceed the taxpayer’s foreign earned income for the year.

The foreign housing cost exclusion is further limited to 30% of the foreign earned income limitation, as adjusted for inflation, or, for all of 2013, $29,280 of qualifying housing costs above a threshold amount of 16% of the foreign earned income exclusion limitation, or, for 2013, $15,616. The IRS is authorized by Sec. 911(c)(2)(B) to adjust the 30% limitation amount based on geographical differences in housing costs relative to those in the United States, which it does annually.

Five locations in France took ninth through 13th places in 2013: Paris and its suburbs of Garches, Sèvres, Suresnes, and Versailles. All were just behind Luanda, the capital of Angola, which is undergoing an oil-related economic boom but whose per capita GDP of $6,200 remains less than one-eighth that of the United States (CIA, The World Factbook).

Notice 2013-31 is effective for tax years beginning on or after Jan. 1, 2013; however, taxpayers may elect to apply it to their 2012 tax return instead of the otherwise applicable adjusted limitation in the 2012 notice.

HSA Figures for 2014 Announced

For calendar 2014, the inflation-adjusted limitations on deductible or excludible contributions to a health savings account (HSA) under Sec. 223 will be:

  • Individual with self-only coverage under a high-deductible health plan (HDHP): $3,300.
  • Individual with family coverage under an HDHP: $6,550.


The amounts are slightly higher than for 2013 ($3,250 and $6,450, respectively). The additional contribution amount for individuals 55 and older remains unchanged at $1,000.

An HDHP’s minimum annual insurance deductible for 2014 will be unchanged from 2013 at $1,250 for self-only coverage and $2,500 for family coverage. Maximum out-of-pocket expenses allowable under an HDHP (other than premiums) will be $6,350 for self-only coverage and $12,700 for family coverage (up from $6,250 and $12,500, respectively, in 2013).

The updated amounts are in Rev. Proc. 2013-25

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