To be eligible to claim the foreign earned income exclusion or the foreign housing exclusion or deduction, you must have a tax home in a foreign country and meet either the bona fide residence test or the physical presence test.

The bona fide residence test can be used by U.S. citizens and U.S. resident aliens who are citizens or nationals of a country with which the United States has an income tax treaty. You must be a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax year. The characteristics usually qualifying you as a bona fide resident include establishing a home and settling in that country with some degree of permanence.

The physical presence test can be used by any U.S. citizen or resident alien. You must be physically present in a foreign country or countries for at least 330 full days during any period of 12 consecutive months. The 12-month period can begin with any day of any calendar month. If you violate U.S. restrictions that prohibit travel to certain countries, you will not be able to count your presence or residence in those countries in meeting the bona fide residence test or the physical presence test.

Generally, your tax home is the general area of your main place of business or post of duty, regardless of where you maintain your family home. If you do not have a regular or main place of business because of the nature of your work, then your tax home may be the place where you regularly live. You are not considered to have a tax home in a foreign country for any period for which your household is in the United States. However, if you are temporarily present in the United States, it does not necessarily mean that your household is in the United States during that time.

You qualify for the foreign earned income exclusion only if your tax home is in a foreign country throughout your period of residence or your 330 days of physical presence. For more information on these topics, select Topics 853 and 855. Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad, contains detailed information on the foreign earned income exclusion and other related topics. Publications can be downloaded from this site, or ordered by calling 1-800-829-3676.

If the information you need relating to this topic is not addressed in Publication 54, you may call the IRS National Office hotline. The number is (202) 874-1460. This is not a toll-free number.

Tax Topics & FAQs | 1999 Tax Year Archives | Tax Help Archives | Home