Publication 54 - Tax Guide For U.s. Citizens And Resident Aliens Abroad - 2006 Page 12
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44Figure 4–A. Can I Claim the Exclusion or Deduction?
Start Here
Yes
Yes
No
No
Do you have foreign
Is your tax home in a
Are you a U.S. resident
Are you a U.S. citizen?
earned income?
foreign country?
alien?
No
No
Yes
Yes
Were you a bona fide
Are you a citizen or
resident of a foreign
national of a country
Yes
country or countries
with which the United
for an uninterrupted
States has an income
period that includes an
tax treaty in effect?
entire tax year?
No
Yes
No
You CAN claim the
foreign earned income
exclusion and the
foreign housing
exclusion or the foreign
*
housing deduction.
Were you physically
present in a foreign
Yes
country or countries for
at least 330 full days
during any period of 12
consecutive months?
No
You CANNOT claim the foreign earned income exclusion, the
foreign housing exclusion, or the foreign housing deduction.
*
Foreign housing exclusion applies only to employees. Foreign housing deduction applies only to the self-employed.
that country. This is fully explained under Waiver
necessarily mean that the given location is your
Example 1. You are employed on an off-
shore oil rig in the territorial waters of a foreign
residence or domicile for tax purposes.
of Time Requirements, later.
country and work a 28-day on/28-day off sched-
See Figure 4-A and information on the fol-
If you do not have a regular or main place of
ule. You return to your family residence in the
lowing pages to determine if you are eligible to
business because of the nature of your work,
United States during your off periods. You are
your tax home may be the place where you
claim the exclusion or deduction.
considered to have an abode in the United
regularly live. If you have neither a regular or
States and do not satisfy the tax home test in the
Tax Home in
main place of business nor a place where you
foreign country. You cannot claim either of the
regularly live, you are considered an itinerant
Foreign Country
exclusions or the housing deduction.
and your tax home is wherever you work.
To qualify for the foreign earned income exclu-
Example 2. For several years, you were a
You are not considered to have a tax home in
marketing executive with a producer of machine
sion, the foreign housing exclusion, or the for-
a foreign country for any period in which your
tools in Toledo, Ohio. In November of last year,
eign housing deduction, your tax home must be
abode is in the United States. However, your
your employer transferred you to London, Eng-
in a foreign country throughout your period of
abode is not necessarily in the United States
land, for a minimum of 18 months to set up a
bona fide residence or physical presence
while you are temporarily in the United States.
sales operation for Europe. Before you left, you
abroad. Bona fide residence and physical pres-
Your abode is also not necessarily in the United
distributed business cards showing your busi-
ence are explained later.
States merely because you maintain a dwelling
ness and home addresses in London. You kept
in the United States, whether or not your spouse
ownership of your home in Toledo but rented it
or dependents use the dwelling.
to another family. You placed your car in stor-
Tax Home
age. In November of last year, you moved your
“Abode” has been variously defined as one’s
spouse, children, furniture, and family pets to a
Your tax home is the general area of your main
home, habitation, residence, domicile, or place
home your employer rented for you in London.
place of business, employment, or post of duty,
of dwelling. It does not mean your principal place
regardless of where you maintain your family
of business. “Abode” has a domestic rather than
Shortly after moving, you leased a car and
home. Your tax home is the place where you are
a vocational meaning and does not mean the
you and your spouse got British driving licenses.
permanently or indefinitely engaged to work as
same as “tax home.” The location of your abode
Your entire family got library cards for the local
an employee or self-employed individual. Hav-
often will depend on where you maintain your
public library. You and your spouse opened
ing a “tax home” in a given location does not
economic, family, and personal ties.
bank accounts with a London bank and secured
Page 12
Chapter 4 Foreign Earned Income and Housing: Exclusion – Deduction
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