Yes. American expatriates can deduct any expense that Americans residing within the U.S. can. This includes any expense you have that is eligible for inclusion on your Schedule A for itemized deductions. The only restrictions are the expenses that directly relate to the foreign income you exclude. However, there are many deductible items that never relate to your foreign income, such as mortgage interest, medical expenses, real estate taxes, personal exemptions and alimony payments you make.