What Is the Physical Presence Test?U.S. citizens or resident aliens with a tax home in a foreign country may be eligible for foreign income tax exclusions up to $80,000. You can meet either the physical presence test or the bona fide residence test to qualify. How Can I Determine if I Meet the Physical Presence Test?You meet the physical presence test if you are physically present in a foreign country or countries 330 full days during a period of 12 consecutive months. Sounds simple enough, but let¿s discuss what they really mean: - 330 full days ¿ The 330 qualifying days do not have to be consecutive, vacation time may be included
- Full days ¿ Full days must begin at 12 a.m. for 24 consecutive hours ¿ if you arrive in Paris at 9a.m. on July 4, then your first full day will begin on July 5
- 12 Consecutive Months ¿ 4 rules ¿ Here are four rules to know when figuring the 12-month period:
- Your 12-month period can begin with any day of the month ¿ it ends the day before the same calendar day, a year later
- Your 12-month period must be made up of consecutive months
- You do not have to begin your 12-month period with your first full day in a foreign country or to end it with the day you leave ¿ you can choose the 12-month period that gives you the most favorable result
- In determining whether the 12-month period falls within a longer stay in the foreign country, 12-month periods can overlap one another
Can I Move about from One Foreign Country to another without Losing Credit to My 330 Day Total?
Yes. But if any part of travel is not in a foreign country and takes more than 24 hours, then you will lose full days. How Is the Physical Presence Test Different from the Bona Fide Residence Test?The physical presence test is based only on how long you stay in a foreign country or countries. Unlike the bona fide residence test, this test does not depend on the kind of residence you establish, your intentions about returning, or the nature and purpose of your stay abroad. What if Circumstances Do Not Permit Me to Be Physically Present? Can I Still Qualify under the Physical Presence Test?You do not meet the physical presence test if illness, family problems, a vacation, or your employer's orders cause you to be present for less than the required amount of time. What Can You Do if You Are Confused about the Physical Presence Test for U.S. Tax Exclusions?International tax is a complex area of the law; it may be necessary to contact an experienced attorney with knowledge of the physical presence test. It could save you a lot of money in taxes. |
