When you have to spend more than $16,128 living overseas, you can claim what you spend above that amount to the limit that has been set for the city you're living in.
For example, if you lived in Dubai, the maximum Foreign Housing Exclusion for tax year 2015 is $57,174.
This means you can claim living expenses between $16,128 and $57,174.
If you spend $30,000 living in Dubai over a full year, you could claim $21,174 in Foreign Housing Exclusion, because that's the amount you spent over the $16,128 threshold.
If you spend $60,000 (or any amount over $57,174) living in Dubai over a full year, you could claim $41,046 in Foreign Housing Exclusion, because the maximum exlusion is $57,174 and we have to deduct $16,128 from that maximum. That leaves $41,046 that you can claim.
Listen to Susan explain more about it...