Navigating Your Taxes

There are two way to qualify for foreign income exclusion (FIE). 

1. Physical presence test. You must be physically present in a foreign country for at least 330 full (24-hour) days during a period of 12 consecutive months; the period can start any day and end with the same calendar day a year later. NOTE: The 330 days need not be consecutive and any days abroad, including vacation count.

2. Bona Fide Residence Test. Ultimately, the IRS decides if you qualify as a bona fide resident. It will be based on determination of on facts and circumstances such as your intent, nature, and length of time abroad.  The period of residency in the foreign country(ies) must be an entire calendar year uninterrupted period. NOTE: you can file an extension that covers you all the way until the following year. It's wierd, but it does exist.

Wrong. Your worldwide income from all sources is subject to federal income tax regardless of where you live. For the most part, you have the same filing requirements whether you are in the United States or abroad 

For example, you may qualify for an automatic 2-month extension of time to file and pay tax (June 15 typically) if you are living outside the United States and Puerto Rico, and your main place of work is outside the US/PR, or you are in military service on duty outside the US/PR. BUT, if you file an extension, you still only have until October 15th to file your personal return.  

Yes. FIE is capped (currently 2023) at $120,000, within that number you can include a limited amount of employer-paid foreign housing expense (reported as foreign income), OH and if you are self-employed (think Schedule C), even if you get a full FIE, you may still owe self-employment tax on your US tax return - Yikes!