Irs Publication 54 - Tax Guide For U.s. Citizens And Resident Aliens Abroad

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

’07

’08

28-day vacation in the United States

Second Full 12-Month Period

•

country, the time you spend on or over interna-

You do not have to begin your 12-month

bona fide residence or physical presence in-

tional waters does not count toward the 330-day

period with your first full day in a foreign

cludes only days of actual residence or pres-

total.

country or end it with the day you leave.

ence within the country.

You can choose the 12-month period that

You can read the Internal Revenue Bulletin

Example. You leave the United States for

gives you the greatest exclusion.

on the Internet at Or, you can get a

France by air on June 10. You arrive in France at

•

copy of the list of countries by writing to:

In determining whether the 12-month pe-

9:00 a.m. on June 11. Your first full day of

riod falls within a longer stay in the foreign

physical presence in France is June 12.

country, 12-month periods can overlap

Internal Revenue Service

Passing over foreign country. If, in travel-

one another.

International Section

ing from the United States to a foreign country,

P.O. Box 920

you pass over a foreign country before midnight

Bensalem, PA 19020-8518

Example 1. You are a construction worker

of the day you leave, the first day you can count

who works on and off in a foreign country over a

toward the 330-day total is the day following the

20-month period. You might pick up the 330 full

day you leave the United States.

U.S. Travel Restrictions

days in a 12-month period only during the middle

Example. You leave the United States by

months of the time you work in the foreign coun-

If you are present in a foreign country in violation

air at 9:30 a.m. on June 10 to travel to Kenya.

try because the first few and last few months of

of U.S. law, you will not be treated as a bona fide

You pass over western Africa at 11:00 p.m. on

the 20-month period are broken up by long visits

resident of a foreign country or as physically

June 10 and arrive in Kenya at 12:30 a.m. on

to the United States.

present in a foreign country while you are in

June 11. Your first full day in a foreign country is

violation of the law. Income that you earn from

June 11.

Example 2. You work in New Zealand for a

sources within such a country for services per-

20-month period from January 1, 2007, through

Change of location. You can move about

formed during a period of violation does not

August 31, 2008, except that you spend 28 days

from one place to another in a foreign country or

qualify as foreign earned income. Your housing

in February 2007 and 28 days in February 2008

to another foreign country without losing full

expenses within that country (or outside that

on vacation in the United States. You are pres-

days. If any part of your travel is not within any

country for housing your spouse or dependents)

ent in New Zealand 330 full days during each of

foreign country and takes less than 24 hours,

while you are in violation of the law cannot be

the following two 12-month periods: January 1,

you are considered to be in a foreign country

included in figuring your foreign housing

2007 – December 31, 2007 and September 1,

during that part of travel.

amount.

2007 – August 31, 2008. By overlapping the

For 2008, the only country to which travel

Example 1. You leave Ireland by air at

12-month periods in this way, you meet the

restrictions applied was Cuba. The restrictions

11:00 p.m. on July 6 and arrive in Sweden at

physical presence test for the whole 20-month

applied for the entire year.

5:00 a.m. on July 7. Your trip takes less than 24

period. See Figure 4-B above.

hours and you lose no full days.

However, individuals working at the U.S. Na-

Waiver of Time

val Base at Guantanamo Bay in Cuba are not in

Example 2. You leave Norway by ship at

violation of U.S. law. Personal service income

Requirements

10:00 p.m. on July 6 and arrive in Portugal at

earned by individuals at the base is eligible for

6:00 a.m. on July 8. Since your travel is not

the foreign earned income exclusion provided

Both the bona fide residence test and the physi-

within a foreign country or countries and the trip

the other requirements are met.

cal presence test contain minimum time require-

takes more than 24 hours, you lose as full days

ments. The minimum time requirements can be

July 6, 7, and 8. If you remain in Portugal, your

Foreign Earned Income

waived, however, if you must leave a foreign

next full day in a foreign country is July 9.

country because of war, civil unrest, or similar

To claim the foreign earned income exclusion,

In United States while in transit. If you are

adverse conditions in that country. You must be

the foreign housing exclusion, or the foreign

in transit between two points outside the United

able to show that you reasonably could have

States and are physically present in the United

housing deduction, you must have foreign

expected to meet the minimum time require-

States for less than 24 hours, you are not treated

earned income.

ments if not for the adverse conditions. To qual-

as present in the United States during the

Foreign earned income generally is income

ify for the waiver, you must actually have your

transit. You are treated as traveling over areas

you receive for services you perform during a

tax home in the foreign country and be a bona

not within any foreign country.

period in which you meet both of the following

fide resident of, or be physically present in, the

requirements.

foreign country on or before the beginning date

How to figure the 12-month period.

There

of the waiver.

•

Your tax home is in a foreign country.

are four rules you should know when figuring the

Early in 2009, the IRS will publish in the

12-month period.

•

You meet either the bona fide residence

Internal Revenue Bulletin a list of countries qual-

•

test or the physical presence test.

Your 12-month period can begin with any

ifying for the waiver for 2008 and the effective

day of the month. It ends the day before

dates. If you left one of the countries on or after

To determine whether your tax home is in a

the same calendar day, 12 months later.

the date listed for each country, you can meet

foreign country, see Tax Home in Foreign Coun-

•

the bona fide residence test or physical pres-

try, earlier. To determine whether you meet ei-

Your 12-month period must be made up of

ence test for 2008 without meeting the minimum

ther the bona fide residence test or the physical

consecutive months. Any 12-month period

can be used if the 330 days in a foreign

time requirement. However, in figuring your ex-

presence test, see Bona Fide Residence Test

country fall within that period.

clusion, the number of your qualifying days of

and Physical Presence Test, earlier.

Chapter 4 Foreign Earned Income and Housing: Exclusion – Deduction

Page 15

Irs Publication 54 - Tax Guide For U.s. Citizens And Resident Aliens Abroad - 2008 Page 15

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