Foreign Earned Income Exclusion - Physical Presence Test
You meet the physical presence test if you are physically present in a foreign country or countries 330 full days during a period of 12 consecutive months. The 330 qualifying days do not have to be consecutive. The physical presence test applies to both U.S. citizens and resident aliens.
The physical presence test is based only on how long you stay in a foreign country or countries. This test does not depend on the kind of residence you establish, your intentions about returning, or the nature and purpose of your stay abroad. However, your intentions with regard to the nature and purpose of your stay abroad are relevant in determining whether you meet the tax home test explained under Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad.
330 Full Days
Generally, to meet the physical presence test, you must be physically present in a foreign country or countries for at least 330 full days during the 12-month period. You can count days you spent abroad for any reason. You do not have to be in a foreign country only for employment purposes. You can be on vacation time.
You do not meet the physical presence test if illness, family problems, a vacation, or your employer's orders cause you to be present for less than the required amount of time. Also, if you are present in a foreign country in violation of U.S. law, you will not be treated as physically present in a foreign country while you were in violation of the law. Income that you earn from source within such a country for services performed during a period of violation does not qualify as foreign earned income.
However, the minimum time requirement can be waived if you must leave a foreign country because of war, civil unrest, or similar adverse conditions in that country. You must be able to show that you reasonably could have expected to meet the minimum time requirements if not for the adverse conditions, and that you had a tax home in the foreign country and were a bona fide resident of, or physically present in, the foreign country on or before the beginning date of the waiver.
A full day is a period of 24 consecutive hours, beginning at midnight. You must spend each of the 330 full days in a foreign country. When you leave the United States to go directly to a foreign country or when you return directly to the United States from a foreign country, the time you spend on or over international waters does not count toward the 330-day total.
You leave the United States for France by air on June 10. You arrive in France at 9:00 a.m. on June 11. Your first full day in France is June 12.
Passing Over Foreign Country
If, in traveling from the United States to a foreign country, you pass over a foreign country before midnight of the day you leave, the first day you can count toward the 330-day total is the day following the day you leave the United States.
You leave the United States by air at 9:30 a.m. on June 10 to travel to Spain. You pass over a part of France at 11:00 p.m. on June 10 and arrive in Spain at 12:30 a.m. on June 11. Your first full day in a foreign country is June 11.
Change Of Location
You can move about from one place to another in a foreign country or to another foreign country without losing full days. But if any part of your travel is not within a foreign country or countries and takes 24 hours or more, you will lose full days.
You leave London by air at 11:00 p.m. on July 6 and arrive in Stockholm at 5:00 a.m. on July 7. Your trip takes less than 24 hours and you lose no full days.
You leave Norway by ship at 10:00 p.m. on July 6 and arrive in Portugal at 6:00 a.m. on July 8. Since your travel is not within a foreign country or countries and the trip takes more than 24 hours, you lose as full days July 6, 7, and 8. If you remain in Portugal, your next full day in a foreign country is July 9.
In United States while in Transit
If you are in transit between two points outside the United States and are physically present in the United States for less than 24 hours, you are not treated as present in the United States during the transit. You are treated as traveling over areas not within any foreign country.
How To Figure The 12-month Period
There are four rules you should know when figuring the 12-month period:
- Your 12-month period can begin with any day of the month. It ends the day before the same calendar day, 12 months later
- Your 12-month period must be made up of consecutive months. Any 12-month period can be used if the 330 days in a foreign country fall within that period
- You do not have to begin your 12-month period with your first full day in a foreign country or to end it with the day you leave. You can choose the 12-month period that gives you the greatest exclusion
- In determining whether the 12-month period falls within a longer stay in the foreign country, 12-month periods can overlap one another
You are a construction worker who works on and off in a foreign country over a 20-month period. You might pick up the 330 full days in a 12-month period only during the middle months of the time you work in the foreign country because the first few and last few months of the 20-month period are broken up by long visits to the United States.
You work in New Zealand for a 20-month period from January 1, 2007, through August 31, 2008, except that you spend 28 days in February 2007 and 28 days in February 2008 on vacation in the United States. You are present in New Zealand 330 full days during each of the following two 12-month periods: January 1, 2007 - December 31, 2007, and September 1, 2007 - August 31, 2008. By overlapping the 12-month periods in this way, you meet the physical presence test for the whole 20-month period. Refer to Chapter 4, Figure 4-B in Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad.