Foreign Earned Income Exclusion - Qualification

Qualification

Only individuals are eligible for the exclusion. To qualify for the exclusion, the taxpayer's tax home must be outside the U.S. In addition, the taxpayer must meet either of two tests:

• Bona fide resident test: the taxpayer was a bona fide resident of a foreign country for a period that includes a full U.S. tax year, or
• Physical presence test: the taxpayer must be outside the U.S. 330 days in any 12 month period.

The bona fide resident test is not available for nonresident aliens. Further, the test is not met if the taxpayer declares to the foreign government that they are not a resident. Such declaration could be on visa applications or tax returns, or imposed as a condition of a visa. Eligibility for the exclusion may be affected by some tax treaties.

Counting the days for the physical presence test requires a determination for each day separately. The IRS makes it clear in Publication 54 that each day can be in more than one 12 month period. A 12 month period may begin on any day of any month.