Exemption for Foreign Area and Cost-of-Living Allowances

IRC §912

Excludes specific foreign area allowances and cost-of-living allowances from gross income for civilian federal employees and Peace Corps volunteers stationed outside the continental U.S.

Eligibility

Applies to civilian U.S. government employees stationed abroad or in certain non-continental U.S. locations, and Peace Corps volunteers.

Frequently Asked Questions

Who is eligible for the Exemption for Foreign Area and Cost-of-Living Allowances?

Applies to civilian U.S. government employees stationed abroad or in certain non-continental U.S. locations, and Peace Corps volunteers.

How does the Exemption for Foreign Area and Cost-of-Living Allowances work?

Excludes specific foreign area allowances and cost-of-living allowances from gross income for civilian federal employees and Peace Corps volunteers stationed outside the continental U.S.

What law authorizes the Exemption for Foreign Area and Cost-of-Living Allowances?

The Exemption for Foreign Area and Cost-of-Living Allowances is authorized under IRC §912 of the Internal Revenue Code (Title 26, United States Code).

Statutory Text — IRC §912

Source: Internal Revenue Code, Title 26, United States Code

§ 912. Exemption for certain allowances The following items shall not be included in gross income, and shall be exempt from taxation under this subtitle:(1) Foreign areas allowancesIn the case of civilian officers and employees of the Government of the United States, amounts received as allowances or otherwise (but not amounts received as post differentials) under—(A) chapter 9 of title I of the Foreign Service Act of 1980, (B) section 4 of the Central Intelligence Agency Act of 1949, as amended (50 U.S.C. 3505), (C) title II of the Overseas Differentials and Allowances Act, or (D) subsection (e) or (f) of the first section of the Administrative Expenses Act of 1946, as amended, or section 22 of such Act. (2) Cost-of-living allowancesIn the case of civilian officers or employees of the Government of the United States stationed outside the continental United States (other than Alaska), amounts (other than amounts received under title II of the Overseas Differentials and Allowances Act) received as cost-of-living allowances in accordance with regulations approved by the President (or in the case of judicial officers or employees of the United States, in accordance with rules similar to such regulations). (3) Peace Corps allowancesIn the case of an individual who is a volunteer or volunteer leader within the meaning of the Peace Corps Act and members of his family, amounts received as allowances under section 5 or 6 of the Peace Corps Act other than amounts received as—(A) termination payments under section 5(c) or section 6(1) of such Act, (B) leave allowances, (C) if such individual is a volunteer leader training in the United States, allowances to members of his family, and (D) such portion of living allowances as the President may determine under the Peace Corps Act as constituting basic compensation. (Aug. 16, 1954, ch. 736, 68A Stat. 290; Pub. L. 86–707, title V, § 523(a), Sept. 6, 1960, 74 Stat. 802; Pub. L. 87–293, title II, § 201(a), Sept. 22, 1961, 75 Stat. 625; Pub. L. 96–465, title II, § 2206(e)(3), Oct. 17, 1980, 94 Stat. 2163; Pub. L. 100–647, title VI, § 6137(a), Nov. 10, 1988, 102 Stat. 3723; Pub. L. 115–141, div. U, title IV, § 401(a)(161), Mar. 23, 2018, 132 Stat. 1192.) Editorial Notes

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Legal Sources

US Code (Official) — 26 USC §912 → Cornell Law Institute — 26 USC §912 → Search IRS.gov for IRC §912 → Treasury Regulations (26 CFR) →

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