Bona Fide Residence Test for International Tax Purposes
What is the Bona Fide Residence Test?
The IRS uses the bona fide residence test to determine whether you are eligible to claim the foreign earned income exclusion or the foreign housing exclusion. In order to meet the bona fide residence test, you must find out if you have established such a residence in a foreign country.
Factors for Determining whether You Meet the Bona Fide Residence Test Include:
- Intention or purpose of your trip;
- Nature and length of your stay abroad; and
- You must show that you were a bona fide resident of a foreign country for an uninterrupted period that includes an entire tax year (January 1 to December 31).
Is your Bona Fide Residence the Same as Your Domicile?
Your bona fide residence is not necessarily the same as your domicile. Your domicile is your permanent home, the place to which you always return or intend to return. Your bona fide residence is a place where you have set up a permanent residence perhaps for purposes of business. For example, if you are working in Paris and you set up a permanent residence indefinitely because of work, this is probably enough to establish a bona fide residence. However, just going to Paris, say as a tourist, would not make the city your bona fide residence. You must show some type of permanent residence.
Who Does the Bona Fide Residence Test Apply to?
The bona fide residence test applies to:
- U.S. citizens
- Any U.S. resident alien who is a citizen or national of a country with which the United States has an income tax treaty
Are There any Exceptions to the Bona Fide Residence Test?
Yes. There are two exceptions to meeting the requirements under the bona fide residence. These exceptions also apply to the physical presence test.
What Can You Do if You are Confused about the Bona Fide Residence Test for U.S. Tax Exclusions?
International tax is a complex area of the law that an experienced attorney can help you with. Contact an international tax lawyer who has knowledge of who qualifies under the bona fide residence test.
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Last Modified: 11-28-2011 04:34 PM PST
