Exclusion amount. The maximum foreign earned income exclusion is now adjusted annually for inflation. For 2008, the maximum exclusion has increased to $87,600. See Limit on Excludable Amount under Foreign Earned Income Exclusion in chapter 4.

Housing expenses—base amount. The computation of the base housing amount (line 32 of Form 2555) is tied to the maximum foreign earned income exclusion. The amount is 16 percent of the exclusion amount (computed on a daily basis), multiplied by the number of days in your qualifying period that fall within your 2008 tax year. For 2008, this amount is $38.30 per day ($14,016 per year). See Housing Amount under Foreign Housing Exclusion and Deduction in chapter 4.

Housing expenses—maximum amount. The amount of qualified housing expenses eligible for the housing exclusion and housing deduction has changed for some locations. See Limit on housing expenses under Foreign Housing Exclusion and Deduction in chapter 4.

Exemption amount. The amount you can deduct for each exemption (based on your filing status and adjusted gross income) is at least $2,333 but not more than $3,500.

Exemption phaseout. You lose part of the benefit of your exemptions if your adjusted gross income is above a certain amount. The amount at which the phaseout begins depends on your filing status. For 2008, the phaseout begins at:

However, you can lose no more than of the amount of your exemptions. In other words, each exemption cannot be reduced to less than $2,333.

Standard deduction. The standard deduction for people who do not itemize deductions on Schedule A (Form 1040) is, in most cases, higher for 2008. The amount depends on your filing status, whether you are 65 or older or blind, and whether an exemption can be claimed for you by another person. The amounts for the standard deduction for 2008 are shown in the instructions for your tax return.

Itemized deductions phaseout. If your adjusted gross income is above a certain amount, you may lose part of your itemized deductions. In 2008, this amount has increased to $159,950 ($79,975 if married filing separately). However, you can lose no more than of the amount of your itemized deductions that otherwise would have applied.

Filing requirements. Generally, the amount of income you can receive before you must file an income tax return has increased. These amounts are shown in chapter 1 under Filing Requirements.

Maximum self-employment tax. For 2008, the maximum amount of net earnings from self-employment that is subject to the social security part of the self-employment tax has increased to $102,000. All net earnings are subject to the Medicare part of the tax. For more information, see chapter 3.

Change of address. If you change your mailing address, be sure to notify the Internal Revenue Service using Form 8822, Change of Address. If you are changing both your home and business addresses, you need to complete two forms.

Figuring tax on income not excluded. If you claim the foreign earned income exclusion, the housing exclusion, or both, you must figure the tax on your nonexcluded income using the tax rates that would have applied had you not claimed the exclusions. See the instructions for Form 1040 and complete the Foreign Earned Income Tax Worksheet to figure the amount of tax to enter on Form 1040, line 44. If you must attach Form 6251 to your return, use the Foreign Earned Income Tax Worksheet provided in the instructions for Form 6251.

Photographs of missing children. The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child.

This publication discusses special tax rules for U.S. citizens and resident aliens who work abroad or who have income earned in foreign countries.

If you are a U.S. citizen or resident alien, your worldwide income generally is subject to U.S. income tax, regardless of where you are living. Also, you are subject to the same income tax filing requirements that apply to U.S. citizens or resident aliens living in the United States. Expatriation tax provisions apply to U.S. citizens who have renounced their citizenship and long-term residents who have ended their residency. These provisions are discussed in chapter 4 of Publication 519.