The IRS has published a tax practice unit on the determination of a tax home for purposes of Code Section 911, dealing with US citizens or residents living abroad. The summary is as follows:
This Unit supersedes the 12/15/14 Unit with the same title.
This Unit discusses the factors to be considered in determining an individual’s tax home for purposes of IRC 911. The concept of “tax home” is important because in order to claim the foreign earned income exclusion, the foreign housing exclusion (for employees), or the foreign housing deduction (for self-employed individuals), an individual must have a tax home in a foreign country or countries.
CAUTION: If an individual’s tax home is still in the United States, then that individual is not eligible to claim the IRC 911 tax exclusions/deductions even if he or she meets the bona fide residence or physical presence test and has foreign earned income.
In order to claim the foreign earned income exclusion, the foreign housing exclusion, or the foreign housing deduction, the taxpayer must:
•Have foreign earned income,
•Be a qualifying individual, and
•Make a valid election.
A qualifying individual is one who has a tax home in a foreign country (or countries) and is:
•A U.S. citizen who is a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax year,
•A 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 and who is a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax year, or
•A U.S. citizen or resident alien who is physically present in a foreign country or countries for at least 330 full days during any period of 12 consecutive months.
NOTE: The minimum time requirements for the bona fide residence or physical presence in a foreign country or countries may be waived, if the individual must leave a foreign country because of war, civil unrest, or similar adverse conditions in that country. Treas. Reg. 1.911-2(f). The IRS annually publishes a list of the countries that qualify for the waiver in
Posted by Lewis J. Saret, Co-General Editor, Wealth Strategies Journal.