Publication 54 - Tax Guide For U.s. Citizens And Resident Aliens Abroad - 2006 Page 15
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Your 12-month period must be made up of
time requirement. However, in figuring your ex-
presence test, see Bona Fide Residence Test
consecutive months. Any 12-month period
and Physical Presence Test, earlier.
clusion, the number of your qualifying days of
can be used if the 330 days in a foreign
bona fide residence or physical presence in-
Foreign earned income does not include the
country fall within that period.
cludes only days of actual residence or pres-
following amounts.
•
ence within the country.
You do not have to begin your 12-month
•
The value of meals and lodging that you
You can read the Internal Revenue Bulletin
period with your first full day in a foreign
exclude from your income because it was
on the Internet at Or, you can get a
country or end it with the day you leave.
furnished for the convenience of your em-
copy of the list of countries by writing to:
You can choose the 12-month period that
ployer.
gives you the greatest exclusion.
•
Pension or annuity payments you receive,
•
Internal Revenue Service
In determining whether the 12-month pe-
including social security benefits (see Pen-
International Section
riod falls within a longer stay in the foreign
sions and annuities, later).
P.O. Box 920
country, 12-month periods can overlap
•
Bensalem, PA 19020-8518
Pay you receive as an employee of the
one another.
U.S. Government. (See U.S. Government
Employees, later.)
Example 1. You are a construction worker
•
who works on and off in a foreign country over a
Amounts you include in your income be-
U.S. Travel Restrictions
20-month period. You might pick up the 330 full
cause of your employer’s contributions to
days in a 12-month period only during the middle
a nonexempt employee trust or to a non-
If you are present in a foreign country in violation
months of the time you work in the foreign coun-
qualified annuity contract.
of U.S. law, you will not be treated as a bona fide
try because the first few and last few months of
•
resident of a foreign country or as physically
Any unallowable moving expense deduc-
the 20-month period are broken up by long visits
present in a foreign country while you are in
tion that you choose to recapture as ex-
to the United States.
violation of the law. Income that you earn from
plained under Moving Expense
sources within such a country for services per-
Attributable to Foreign Earnings in 2 Years
Example 2. You work in New Zealand for a
formed during a period of violation does not
in chapter 5.
20-month period from January 1, 2005, through
qualify as foreign earned income. Your housing
•
August 31, 2006, except that you spend 28 days
Payments you receive after the end of the
expenses within that country (or outside that
in February 2005 and 28 days in February 2006
tax year following the tax year in which
country for housing your spouse or dependents)
on vacation in the United States. You are pres-
you performed the services that earned
while you are in violation of the law cannot be
ent in New Zealand 330 full days during each of
the income.
included in figuring your foreign housing
the following two 12-month periods: January 1,
amount.
2005 – December 31, 2005, and September 1,
Earned income. This is pay for personal serv-
For 2006, the only country to which travel
2005 – August 31, 2006. By overlapping the
ices performed, such as wages, salaries, or pro-
restrictions applied was Cuba. The restrictions
12-month periods in this way, you meet the
fessional fees. The list that follows classifies
applied for the entire year.
physical presence test for the whole 20-month
many types of income into three categories. The
However, individuals working at the U.S. Na-
period. See Figure 4-B below.
column headed Variable Income lists income
val Base at Guantanamo Bay in Cuba are not in
that may fall into either the earned income cate-
violation of U.S. law. Personal service income
gory, the unearned income category, or partly
Waiver of Time Requirements
earned by individuals at the base is eligible for
into both. For more information on earned and
the foreign earned income exclusion provided
unearned income, see Earned and Unearned
Both the bona fide residence test and the physi-
the other requirements are met.
Income, later.
cal presence test contain minimum time require-
ments. The minimum time requirements can be
Foreign Earned Income
Earned
Unearned
Variable
waived, however, if you must leave a foreign
Income
Income
Income
country because of war, civil unrest, or similar
To claim the foreign earned income exclusion,
Salaries and
Dividends
Business
adverse conditions in that country. You also
the foreign housing exclusion, or the foreign
wages
Interest
profits
must be able to show that you reasonably could
housing deduction, you must have foreign
Commissions
Capital gains
Royalties
have expected to meet the minimum time re-
earned income.
Bonuses
Gambling
Rents
quirements if not for the adverse conditions. To
Foreign earned income generally is income
Professional
winnings
Scholarships
qualify for the waiver, you must actually have
fees
Alimony
and
you receive for services you perform during a
your tax home in the foreign country and be a
Tips
Social security
fellowships
period in which you meet both of the following
bona fide resident of, or be physically present in,
benefits
requirements.
the foreign country on or before the beginning
Pensions
•
date of the waiver.
Your tax home is in a foreign country.
Annuities
Early in 2007, the IRS will publish in the
•
In addition to the types of earned income
You meet either the bona fide residence
Internal Revenue Bulletin a list of countries qual-
listed, certain noncash income and allowances
test or the physical presence test.
ifying for the waiver for 2006 and the effective
or reimbursements are considered earned in-
To determine whether your tax home is in a
dates. If you left one of the countries on or after
come.
the date listed for each country, you can qualify
foreign country, see Tax Home in Foreign Coun-
for the bona fide residence test or physical pres-
try, earlier. To determine whether you meet ei-
Noncash income. The fair market value of
ence test for 2006 without meeting the minimum
ther the bona fide residence test or the physical
property or facilities provided to you by your
Figure 4–B. How To Figure Overlapping 12-Month Periods
This figure illustrates Example 2 under How to figure the 12-month period.
First Full 12-Month Period
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
’05
’05
’05
’05
’05
’05
’05
’05
’05
’05
’05
’05
’06
’06
’06
’06
’06
’06
’06
’06
*
*
*
28-day vacation in the United States
Second Full 12-Month Period
Chapter 4 Foreign Earned Income and Housing: Exclusion – Deduction
Page 15
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