What happens when actual housing expenses exceed the fair rental value of the residence?
Actual housing expenses that exceed the fair rental value limitation are not deductible. There are no provisions to carry over unused housing expenses. When housing expenses exceed the fair rental value, spreading some housing costs over two or more years may save some deductions. This approach reduces your taxable income by maximizing your exclusion. The above is the current IRS interpretation which has been challenged in court. The IRS has lost the initial court decision and we are currently waiting to see if it is appealed. Return to questions.
