Qualifying for the Foreign Earned Income Exclusion
One Full Year of Residence
A person is considered a "bona fide resident" of the foreign country if that person resides in that country for "an uninterrupted period that includes an entire tax year." A tax year is January 1 through December 31. The qualifying period for the bona fide residence test must include one full calendar year.
Trips outside the Foreign Country
Brief trips or vacations outside the foreign country will not jeopardize a person's status as a bona fide resident, as long as the trips are brief and the person clearly intended to return to the foreign country. A person can even make brief trips to the United States.
Statement to Foreign Authorities
A person is not be considered a bona fide resident of a foreign country if a person has submitted a statement to the foreign country that he or she is not a resident of that country, and the foreign government has determined that the person is not subject to their tax laws as a resident.
Tax Treaty
Special treatment of income under an income tax treaty does not prevent a person from meeting the bona fide residence test.
Physical Presence Test
A person is considered physically present in a foreign country (or countries) if the person resides in that country (or countries) for at least 330 full days in any consecutive 12-month period. A person can live and work in any number of foreign countries but must be physically present in those countries for at least 330 full days.
Full Day
A "full day" is 24 hours. So, the day of arrival in and the day of departure from a foreign country are generally not counted towards the physical presence test.
12-Month Period
The qualifying period can be any consecutive 12-month period of time. A person does not have to begin his or her qualifying period with the first day in a foreign country. A person can choose which 12-month period to use for the physical presence test. This gives the taxpayer freedom to choose a 12-month period that provides the greatest income exclusion. Both vacation and business days spent in the foreign country count towards meeting the 330 day threshold.
Travel Outside the Foreign Country
Travel outside of the foreign country where a person resides generally will not jeopardize the 330 full days requirement for the physical presence test. The IRS explains it this way, "You can move about from one place to another in a foreign country or to another foreign country without losing full days. If any part of your travel is not within any foreign country and takes less than 24 hours, you are considered to be in a foreign country during that part of travel." (Source: Publication 54, section on the physical presence test.)
Waiver to the Time Requirements due to Adverse Conditions
The minimum time requirements for both the bona fide and physical presence tests can be waived. The only valid reason for a waiver is that to leave the foreign country because of "war, civil unrest, or similar adverse conditions." The taxpayer should be able to prove that he or she would have met the time requirements if adverse conditions had not interrupted their residence.
Prohibition on Travel to Cuba
Time spent residing or working in Cuba will not qualify for the bona fide residence or physical presence tests.