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Physical Presence Test for the Foreign Earned Income Exclusion

Physical Presence Test for the Foreign Earned Income Exclusion

Physical Presence Test for the Foreign Earned Income Exclusion


The physical presence test, the second of the two tests that can be used to qualify for the Foreign Earned Income Exclusion.

Qualifying For The Physical Presence Test

To meet the physical presence test, you must be physically present in a foreign country or countries 330 full days during a period of 12 consecutive months. While the months must be consecutive, the days do not. What this means is that you are limited to a maximum of 35 days in the United States during the 12-month qualifying period. Full days are defined as a 24-hour period beginning at midnight. Time spent on or over international waters in transit to or from the United States does not count towards a day present in a foreign country. You can count all full days you spent abroad for any reason. Whether you spent days in a foreign country or foreign countries for personal or business reasons are not relevant, however you must spend each of the 330 full days in a foreign country.

12-Month Physical Presence Period

There are four rules you should know when figuring the 12-month physical presence period:

  1. Your 12-month period is not limited to a calendar year period (i.e. January 1 – December 31), it can begin with any day of the month. It ends the day before the same calendar day, 12 months later.
  2. Your 12-month period must be made up of consecutive months. Any 12-month period can be used if the 330 days in a foreign country fall within that period.
  3. You do not have to begin your 12-month period with your first full day you arrive or end with the day you leave, but rather you can choose the 12-month period that gives you the greatest exclusion.
  4. 12-month periods can overlap one another and can differ from tax year to tax year.

Tax Home

The physical presence test is based only on how long you stay in a foreign country or countries. It does not depend on the kind of residence you establish, your intentions about returning to the United States, or the nature and purpose of your stay abroad. However, your intentions with regard to the nature and purpose of your stay abroad are relevant in determining whether you meet the tax home test.

Your tax home is the general areas of your main place of business, employment or post of duty, regardless of where you maintain your family home. If there is no regular place of business, your tax home is the place where you regularly live.

 

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