Publication 54 - Tax Guide For U.s. Citizens And U.s. Citizens Abroad - 2001 Page 12
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44Figure 4-A. Can I Claim the Exclusion or Deduction?
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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 with
Yes
country or countries for
which the Unted States
an uninterrupted period
has an income tax treaty
that includes an entire
in effect?
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.
Temporary or
Foreign Country
Example 2. For several years, you were a
marketing executive with a producer of machine
Indefinite Assignment
To meet the bona fide residence test or the
tools in Toledo, Ohio. In November of last year,
physical presence test, you must live in or be
The location of your tax home often depends on
your employer transferred you to London, En-
present in a foreign country. A foreign country
whether your assignment is temporary or indefi-
gland, for a minimum of 18 months to set up a
usually is any territory (including the air space
nite. If you are temporarily absent from your tax
sales operation for Europe. Before you left, you
and territorial waters) under the sovereignty of a
home in the United States on business, you may
distributed business cards showing your busi-
government other than that of the United States.
be able to deduct your away-from-home ex-
ness and home addresses in London. You kept
The term “foreign country” includes the sea-
penses (for travel, meals, and lodging) but you
ownership of your home in Toledo but rented it
bed and subsoil of those submarine areas adja-
would not qualify for the foreign earned income
to another family. You placed your car in stor-
exclusion. If your new work assignment is for an
cent to the territorial waters of a foreign country
age. In November of last year, you moved your
indefinite period, your new place of employment
and over which the foreign country has exclu-
spouse, children, furniture, and family pets to a
becomes your tax home and you would not be
sive rights under international law to explore and
home your employer rented for you in London.
able to deduct any of the related expenses that
exploit the natural resources.
Shortly after moving, you leased a car and
you have in the general area of this new work
The term “foreign country” does not include
you and your spouse got British driving licenses.
assignment. If your new tax home is in a foreign
Puerto Rico, Guam, the Commonwealth of the
Your entire family got library cards for the local
Northern Mariana Islands, the Virgin Islands, or
country and you meet the other requirements,
public library. You and your spouse opened
U.S. possessions such as American Samoa. For
your earnings may qualify for the foreign earned
bank accounts with a London bank and secured
purposes of the foreign earned income exclu-
income exclusion.
consumer credit. You joined a local business
sion, the foreign housing exclusion, and the for-
league and both you and your spouse became
If you expect your employment away from
eign housing deduction, the terms “foreign,”
active in the neighborhood civic association and
home in a single location to last, and it does last,
“abroad,” and “overseas” refer to areas outside
worked with a local charity. Your abode is in
for 1 year or less, it is temporary unless facts
the United States, American Samoa, Guam, the
London for the time you live there. You satisfy
and circumstances indicate otherwise. If you
Commonwealth of the Northern Mariana Is-
the tax home test in the foreign country.
expect it to last for more than 1 year, it is indefi-
lands, Puerto Rico, the Virgin Islands, and the
nite. If you expect it to last for 1 year or less, but
Antarctic region.
at some later date you expect it to last longer
than 1 year, it is temporary (in the absence of
facts and circumstances indicating otherwise)
until your expectation changes.
Page 12
Chapter 4 Foreign Earned Income and Housing: Exclusion – Deduction
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