For individuals working abroad and taking the foreign housing exclusion: Make sure your expenses are reasonable.

Lavish or extrvagant costs do not qualify as eligible housing expenses in determining the tax-free amount. Ditto for the cost of domestic labor, pay TV subscriptions, funiture or accessories, improvements that increase the value of your property and certain other expenditures. On exam, agents will be sure to check whether you're complying with all of the rules.