Steve,

You don't qualify to claim foreign earned income credit and
the housing cost credit for either year, but all is not
lost.

Since the foreign jobs were temporary, you may be able to
deduct on Schedule C your expenses for travel, meals and
lodging if you were there as a self-employed person. If not,
then the expenses may qualify as unreimbursed employee
business expenses that might be deductible on Schedule A
(Form 2106).

To qualify for the foreign earned income credit and the
housing cost credit, you must meet several tests:

1. Have a tax home outside of the US.
You met this test since you were working in Uganda and
Italy.

2. Establish you are either:
a. a US citizen and a bona fide resident of a foreign
country for the entire tax year, or
b. a US citizen and be physically present in a foreign
country or countries for at least 330 full days
during any consecutive 12 month period.

You were only in Italy for 289 days for 9 1/2 months during
2004 and 2005 so you don't meet either of these tests since
(a) you were not a bona fide resident of either Uganda or
Italy for the entire tax year or (b) you were not in Uganda
or Italy for at least 330 days for 12 consecutive months.

Had you not gone back to NM for the 7 weeks, you would have
met test 2b and would have been able to claim the housing
expense exclusion or the housing expense credit.

Rudy
www.LizcanoTaxServicesLLC.com

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >

I believe I stummped my accountant with my case. Any advice
would be greatly appreciated.

I worked part of 2005 in Italy (Jan-May), before returning
to Albuquerque, New Mexico, which has always been my
permanent home. I worked the rest of 2005 in Albuquerque. My
question is whether or not my housing costs in Italy are
deductable.

In 2004, I claimed foregin exclusion for the first 6 months,
as I finished a year of work in Uganda. While I was in
Uganda, I did make a trip back to my home in Albuquerque. I
returned to Albuquerque at the end of June, and received 7
weeks of wages in Albuquerque. I also renewed my drivers
license, and met my financial planner. In mid August
(2004), I began a 9 month job in Rome, knowing that I would
return to Albuquerque afterwards, which I did in May 2005. I
also came back to Albuquerque in December 2004 during my
holidays to be with my fianc=E9.

In 2004, I did not deduct the housing costs I had in Italy
(between August and December). However, I now believe I
should have claimed my Italian housing expenses during 2004,
and would like to for the 5 months I was there in 2005.

Can anybody out there tell me if this makes logical sense!

Thanks!

Regards,
Steve

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >