Bonafide resident test versus physical presence test
U.S. expatriates must reside for an entire uninterrupted calendar tax year (January 1st through December 31st) within a foreign country to qualify for the Internal Revenue Code’s bona fide residence test.
Physical presence test requirements only require expatriates to reside in a foreign country for 330 days within in a 12-month period.
Both statutes provide expatriates an opportunity to take advantage of foreign tax credits, foreign income tax exclusions, and other international tax benefits.
Below are a few other factors that can directly affect your bonafide residence test:
- Outside trips
- Sworn statements
- Full credit for days test
- Maximizing credits
- Foreign traveling
Outside trips
Any trips or vacations with the clear intent of returning to your host country will not have any affect on your bonafide residence test.
Sworn Statements
If you are not subject to the tax laws governing the foreign country you reside in and you file a written statement declaring you are not a resident of that country, you will not be considered as a bonafide resident. PIASCIK professional tax experts can help you prepare the statement or overview previous statements.
Full credit for day test
Expatriates must reside a full 24 hours in their host country to receive credit on their bonafide residence test. Because the day of arrival and the day of departure don't usually include full days, they are generally not counted towards either the physical presence test or bonafide residence test.
Maximizing credits
Expatriates do not have to claim the first day they arrive in their host country toward meeting their 330 day minimum. PIASCIK international tax professionals can help you maximize credits by helping you decide which qualifying days are the most beneficial.
Foreign traveling
Travel between foreign countries or within a foreign country provides full foreign credit for bonafide residence status.
Time requirement exemptions
The time required to satisfy bonafide residency status can be waived in certain circumstances, such as being forced out of the country under the threat of war.
Saving with world-class service
PIASCIK international tax professional’s expertise expands over 75 years of combined experience with over 90 expatriates represented in over 49 countries and nearly every continent. Additionally, PIASCIK international tax professionals include the president of the Virginia International Business Council, the Treasure of the Society of International Business Fellows, and NFLPA Registered Player Financial Advisors. Our international tax professionals are trusted members of the community with peer recognition as industry leaders in IC-DISC matters, expatriate taxation, transfer pricing and other international tax regulations.
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