The US Treasury has announced another change in the amount of housing expenses that a US citizen or resident alien who lives in Bermuda and who qualifies for the foreign housing exclusion can claim on their 2006 US Federal individual income tax return. Effective retroactive to January 1, 2006 the amount is now $72,000.

In June 2006 the Tax Increase Prevention and Reconciliation Act of 2005 limited the amount of foreign housing expenses that can be claimed for 2006 to $24,720.

In October 2006 the United States Treasury increased the amount for individuals residing in Bermuda to $26,200.

In late February 2007 United States Treasury again increased the amount for Bermuda to $72,000, but only for individuals living in Hamilton, and retained the amount for individuals living elsewhere in Bermuda to $26,200.

A few days, and hundreds of irate telephone calls later, the US Treasury increased the amount for all of Bermuda to $72,000.

If you are preparing your own 2006 tax return, keep in mind that the $72,000 amount is just one step in calculating the foreign housing exclusion.

The base amount of foreign housing costs for 2006 is 16 percent of the current year maximum foreign earned income exclusion, 16 percent x $82,400 = $13,184. Hence, the maximum foreign housing exclusion that can be claimed in 2006 is $58,816 ($72,000 less $13,184).

Thus, the maximum foreign earned income ($82,400) and housing exclusions ($58,816) that an individual residing in Bermuda may claim in 2006 is now $141,216.

The tax advice given by this column is, by necessity, general in nature. You should, of course, check with your own US tax consultant as to how specific transactions affect you since tax advice varies with individual circumstances.