If you’re an American expat living abroad, you’ve probably heard of the “bona fide residence test” before. But what is the bona fide residence test, and how does it work? Here are some key facts to know.
What Is the Bona Fide Residence Test?
The bona fide residence test is used to gauge whether an American is truly a resident of a foreign country. Simply moving out of the US is not sufficient for the IRS to consider you an expat. You have to meet certain qualifications first.
Until you do, you may not be eligible for certain expat tax benefits, such as the:
Even if you’ve lived in another country for some time, it’s never wise to assume that you’re a bona fide resident in the eyes of the IRS. So how can you be sure?
That’s where the bona fide residence test comes in.
What Are the Qualifications for Bona Fide Residence?
In order to qualify as a bona fide resident and claim certain tax deductions and exclusions available for expats, you must meet all four of these requirements:
- You must be a US citizen (or resident alien living in a country that has a tax treaty with the US)
- You must have a residence in a foreign country
- You must live within that country for an entire tax year—typically January 1 through December 31 of a single year (though brief trips or vacations to the US may be allowed)
- You must not have any plans of moving back to the US in the foreseeable future
Most of these are pretty straightforward and objective. Still, there’s room for confusion. To help make this all clearer, here are some examples of when some might—or might not—pass the bona fide residence test.
Examples of Bona Fide Residence Tests
Let’s say Sarah is an American citizen who buys a home in Ireland. Every year, she spends six months in Ireland, and six months in the US.
Sarah does not pass the bona fide residence test. To become a bona fide resident, she must spend at least one full tax year in a foreign country. Because she only stays in Ireland for six months at a time, she does not meet this qualification.
Miguel, another American citizen, sells his home in America and sets off to explore the world. He travels around the globe, lodging in hotels, inns, and hostels. Sometimes, he finds a host family to live with. Regardless, he never stays in one country for more than a few months before moving on.
Miguel does not pass the bona fide residence test. Like Sarah, he does not stay in any single country for a full tax year, and as a result, does not qualify as a bona fide resident.
Chris is an American citizen who moves to Turkey for a three-year work assignment. During those three years, Chris lives exclusively in Turkey, and never once returns to the US. At the end of those three years, however, his work assignment will be over, and he will be transferred back to the US.
Chris does not pass the bona fide residence test. Even though he lives in Turkey for at least a complete tax year, he already has plans to return to the US. As a result, he is not a bona fide resident.
Adriana moves from America to Germany in July of 2022, expecting to remain permanently. However, a year later, in July of 2023, she changes her plans and returns to the US.
Adriana does not pass the bona fide residence test. While she is in Germany for 12 months—a full year—she is not there for a single complete tax year. That would require her to reside in Germany from January 1 until December 31 of the same year.
(She may still qualify for the physical presence test, though. If you want to learn more about the difference between the physical presence test and the bona fide residence test, we’ve got you covered.)
Jack accepts a job in China, where he may be employed indefinitely. He moves from America to a home in Beijing in November of 2024. In December of 2025, he is still living in China without plans to leave.
Does Jack pass the bona fide residence test? Yes! Because Jack has lived in a foreign country for at least a full tax year and has no current plans to return to the US, he has established bona fide residence, meaning he can claim the Foreign Earned Income Exclusion.
Abby moves to India with her immediate family on January 1, 2030. While there, her aunt in the US becomes sick, and she returns for three weeks to help care for her relative. Then, she goes back to India and remains until the end of 2030, with no plans to leave.
Abby does pass the bona fide residence test. She has a residence in India, stayed there for a complete tax year, and has no plans to move again. Even though she was in the US briefly during the year, it wasn’t a long enough stay to disqualify her from being a bona fide resident of India.
Can I Be a Bona Fide Resident for Only Part of a Year?
In a sense, yes. You can only qualify as a bona fide resident as long as you spent an entire tax year in a foreign country. However, if you meet that qualification, you may also qualify for part of the previous or next year.
For example, let’s say you moved to Argentina in May of 2019 and stayed there until February of 2021. In this case, because you spent the entire tax year of 2020 in Argentina, you count as a bona resident for the time you lived there in 2019 and 2021 as well, even though those were not complete tax years.
Expat Taxes Can Be Confusing…How About a Little Help?
Knowing whether you qualify as a bona fide resident—or will in the future—can make a dramatic impact on how you file your taxes. In many cases, it could save you thousands of dollars.
If you’d like some help with your expat taxes, we’d love to lend a hand.
At Greenback Expat Tax Services, we have years of experience helping expats meet their US tax obligations and optimize their financial strategies. Contact us, and we’ll be happy to answer all your questions. Get Started on Your Expat Taxes with Greenback.