Bona Fide Residence Test for Foreign Income Exclusion

Bona Fide Residence Test for Foreign Income Exclusion

The bona fide residence test, is one of the two tests that can be used to qualify for the Foreign Earned Income Exclusion.

Uninterrupted Period Including Entire Tax Year

To meet the bona fide residence test, you must be a bona fide resident of a foreign country (or countries) for an uninterrupted period of time that includes an entire tax year (January 1 – December 31).

Bona Fide Residence Test Can Only Be Used By U.S. Citizen Or Resident Alien

The bona fide residence test applies to U.S. citizens and to any U.S. resident alien who is a citizen or national of a country with which the United States has an income tax treaty in effect

To see if you meet the bona fide residence test in a foreign country, you must find out if you have established such a residence in a foreign country. 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.

Example:
You have a domicile in Phoenix, Arizona, and a bona fide residence in Hong Kong, China, if you intend to return to Phoenix. The fact that you go to Hong Kong does not automatically make Hong Kong your bona fide residence. If you go there as a tourist, or on a short business trips, and return to Phoenix, you have not established a bona fide residence in Hong Kong. But if you go to Hong Kong to work for an indefinite or extended period and you set up permanent quarters there for yourself and/or your family, you probably have established a bona fide residence, even though you intend to return eventually to the Phoenix.

Temporary Absences

During the period of bona fide residence, you can leave the country for brief or temporary trips back to the United States or elsewhere for vacation or business. To keep your status as a bona fide resident of a foreign country, you must have a clear intention of returning from such trips, without unreasonable delay, to your foreign residence or to a new bona fide residence in another foreign country.

It is important to note that just because you live in a foreign country for an entire tax year does not mean that you automatically meet the bona fide residence test.

Download Our Expat Tax Guide

We Offer Financing for Multi-Year Tax Prep Catchup Projects

Call for a FREE Consultation 800-829-7483

Legacy Tax and Resolution can take your case, process and file the appropriate forms and help reduce you tax burden. Call Legacy Tax and Resolution Service NOW

See our Tax Video Library