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
- Bona fide residency in a foreign country for an uninterrupted period that includes an entire tax year (January 1 to December 31).
Is My Bona Fide Residence the Same as My 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, but without the intent to remain there until you die. 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 for a short while, say as a tourist, would not make the city your bona fide 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. People who have had to leave the country where they were claiming a bona fide residence because of civil unrest or war may be able to waive the time requirement if they can demonstrate that they would have remained in the country for the required amount of time except for the dangerous situation. Civilians working on the United States Naval Base at Guantanamo Bay, Cuba are exempt from having to satisfy the bona fide residence test.
What Can I Do If I Am Confused about the Test?
International tax is a complex area of the law that an experienced attorney can help you with. Contact a tax lawyer if you have questions about the bona fide residence test.