More on Foreign Earned Income Exclusion (this should be of interest particularly to US citizens filing taxes in two countries). To claim the Foreign Earned Income Exclusion, you need to file Form 2555 and pass either the Bona Fide Residency test or the Physical Presence Test To qualify for the Foreign Earned Income Exclusion, you have to pass one of two tests: The Bona Fide Residency Test or the Physical Presence Test. To pass, you have to have lived abroad for a certain number of days and have had limited connections with the U.S. If you qualify, then you’ll have to file Form 2555 to claim the FEIE. Yes, you have to jump through hoops. If you want to pass the Bona Fide Residency or Physical Presence Test you need to track your time carefully! This trips up a lot of American expatriates looking to claim the FEIE. In order to claim the FEIE you need to pass either the Bona Fide Residency Test or the Physical Presence Test. Tracking your time is essential because you could fail the Physical Presence Test if you’re off by even a few hours. To qualify, you must have been in a foreign country for 330 full days out of the year—the “full days” is where U.S. expats get tripped up. If, for example, you’re on a 12-hour trans-oceanic flight, those 12 hours may not count toward your full 330 days because you’re technically in international airspace. To qualify as a Bona Fide Resident, for the first year you need to have been living in a foreign country for an entire tax year, which is where many expats get confused. If you go back to the U.S. to visit family for a month, the time you spend in the U.S. does not count. As with most overseas tax situations, there are a variety of different stipulations and considerations, so it’s always smart to let a tax professional help you navigate U.S. taxes while living abroad. You know we specialize in cross border accounting, right? ea@venturapranas.com #CrossBorderAccounts #TransnationalTaxation #ForeignIncomeExclusion
