Physical Presence Test – Better For Foreign Earned Income Exclusion

You might have heard about physical presence test and bona fide residence test to qualify for foreign earned income exclusion. You might also be aware of the fact that you will have to qualify in one of these tests for FEIE. However, there are reasons why physical presence test is better as compared to the other test. Let us explore these reasons here:

foreign earned income exclusion

No need to prove to get foreign earned income exclusion:

In the case of bona fide residence test, you will have to prove certain things to qualify for the FEIE. But, in the case of the physical presence test, you will not have to prove any such things. You will have to, of course, prove that you were in a foreign country or countries for at least 330 days out of the 12-month period and you have not visited the United States.

Also, the 12-month period need not be essentially from January to December. It can be any part of the year and the only thing is that you should have lived for more than 330 days and has earned in a foreign country.

No need to establish residence for foreign earned income exclusion:

All the nations that focus on tax non-residency pay attention to your tax home and wish to prove that you have established substantial associations and residence in that tax home. In this case, being the citizen of the United State is a bit easier. You need not have to establish associations or there is no need to prove that you live in some other nation. It is good enough if you are a full-fledged digital nomad.

So, for these reasons you can get foreign earned income exclusion in physical presence test as against bona fide residence test. You can get complete guidance in this regard from professional services.

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