Greenback Cautions Expats To Track Holiday Travel Closely

Americans living and working abroad are privy to a host of available deductions, credits, and benefits that allow them to avoid dual taxation. In order to qualify, they must meet certain guidelines, including the amount of time spent outside of the US. Before traveling this holiday season, every US expats should know about the Bona Fide Residence and Physical Presence Tests.

Read the full press release, originally published on PR Web, below:

In addition to braving the busy holiday travel season, Americans living and working abroad must also brave the provisions of their expatriate tax returns. Holiday travel, for the US expat, typically means more than just visiting loved ones or escaping to a winter wonderland. US expats must also pay very close attention to where they travel and to the amount of time spent traveling in order to meet the guidelines of certain US expat tax opportunities.

“US expats must meet specific guidelines that speak to the amount of time they are outside of the US in order to claim many available credits and deductions on their US expat taxes,” says Greenback Expat Tax Services President David McKeegan. “As they plan for their holiday travel, it’s important they take into consideration the amount of time they’ve spent outside of the United States over the span of a tax year,” he said.

According to Mr. McKeegan, there are two key tests, and American expats should ensure they meet the requirements of at least one when filing for their expatriate tax returns. Those include the Physical Presence Test and the Bona Fide Residence Test. Meeting either of these two tests will allow US expats to qualify for exclusions on their US expat taxes.

“Both the Physical Presence and Bona Fide Residence Tests were designed to give tax breaks to Americans who live and work abroad,” said Mr. McKeegan. “The parameters of each are very specific,” he said, “so it’s very important US expats know the exact provisions of each when planning their holiday travel. Otherwise, they may lose the opportunity to take advantage of significant US expat tax credits and deductions.”

The Physical Presence Test is designed to give a tax break to those who are away from home for eleven months or more. They must be inside a foreign country for at least 330 days within a 365-day period. 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. The Bona Fide Residence Test is geared more towards American expats who plan to reside overseas for an indefinite amount of time. To qualify, the US expat must have an established residence within a foreign country; reside in that foreign residence for a full calendar year; and have intentions of staying inside that country indefinitely.

“The criteria involved in both the Physical Presence and Bona Fide Residence Tests are not complicated,” said Mr. McKeegan. “However, it’s important to know them in order to qualify for such allowances as the Foreign Earned Income Exclusion, Foreign Tax Credit, and the Foreign Housing Credit,” he said. “Meeting either test can have a big impact on US expat taxes by potentially saving US expats thousands of dollars each year.”