Filing Expat Tax Returns Using The Physical Presence Test


Americans living abroad need to pay special attention to specific guidelines in order to qualify for important expat tax exclusions. The Foreign Earned Income Exclusion, Foreign Tax Credit, and the Foreign Housing Credit are the most important benefits American expats can leverage when filing their expat tax returns. Using these allowances will help them to avoid dual taxation and to save significant tax savings on their expat tax returns.

Expat Tax Resident Tests

In order to qualify for the aforementioned benefits, Americans living abroad will need to meet one of two qualifying residency tests:  the Bona Fide Resident Test  or the Physical Presence Test.  While the Bona Fide Residence Test is mainly geared towards Americans who plan to reside overseas for an extended or permanent amount of time, the Physical Presence Test is slightly different in that it is designed to give a tax break for those who are only away from home for eleven months or more.

Individuals who qualify for the Physical Presence Test are typically on foreign assignment through their employers, location independent professionals, or entrepreneurs working overseas, though there are other exceptions. They must be inside a foreign country for at least 330 days within a 365-day period. They  must also be legally residing in that foreign country. A few additional and important notes include:

  • Each day on US soil (including inside US territories) is deducted from the total
  • Each day spent traveling to or from the United States is also deducted

Need Help with your Expat Tax Returns?

We have another video about the Physical Presence Test and how it affects your expat tax here. If you have any questions about your expat tax returns, or if you’d like to learn about our expat tax services, please contact us.

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