Publication 54 - Tax Guide For U.s. Citizens And Resident Aliens Abord - 2011 Page 13
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44Figure 4–A. Can I Claim Either Exclusion or the 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.
Temporary or
your expectation changes. Once your expecta-
those areas listed or described in the previous
Indefinite Assignment
sentence.
tion changes, it is indefinite.
The location of your tax home often depends on
Foreign Country
American Samoa,
whether your assignment is temporary or indefi-
nite. If you are temporarily absent from your tax
Guam, and the
To meet the bona fide residence test or the
home in the United States on business, you may
Commonwealth of the
be able to deduct your away-from-home ex-
physical presence test, you must live in or be
Northern Mariana Islands
penses (for travel, meals, and lodging), but you
present in a foreign country. A foreign country
would not qualify for the foreign earned income
includes any territory under the sovereignty of a
Residence or presence in a U.S. possession
exclusion. If your new work assignment is for an
government other than that of the United States.
does not qualify you for the foreign earned in-
indefinite period, your new place of employment
come exclusion. You may, however, qualify for
The term “foreign country” includes the coun-
becomes your tax home and you would not be
an exclusion of your possession income on your
try’s airspace and territorial waters, but not inter-
able to deduct any of the related expenses that
U.S. return.
national waters and the airspace above them. It
you have in the general area of this new work
also includes the seabed and subsoil of those
assignment. If your new tax home is in a foreign
American Samoa. There is a possession ex-
submarine areas adjacent to the country’s terri-
country and you meet the other requirements,
clusion available to individuals who are bona
torial waters over which it has exclusive rights
your earnings may qualify for the foreign earned
fide residents of American Samoa for the entire
under international law to explore and exploit the
income exclusion.
tax year. Gross income from sources within
natural resources.
If you expect your employment away from
American Samoa may be eligible for this exclu-
home in a single location to last, and it does last,
The term “foreign country” does not include
sion. Income that is effectively connected with
for 1 year or less, it is temporary unless facts
Antarctica or U.S. possessions such as Puerto
the conduct of a trade or business within Ameri-
and circumstances indicate otherwise.
Rico, Guam, the Commonwealth of the Northern
can Samoa also may be eligible for this exclu-
Mariana Islands, the U.S. Virgin Islands, and
If you expect it to last for more than 1 year, it
sion. Use Form 4563, Exclusion of Income for
is indefinite.
Johnston Island. For purposes of the foreign
Bona Fide Residents of American Samoa, to
earned income exclusion, the foreign housing
figure the exclusion.
If you expect it to last for 1 year or less, but at
exclusion, and the foreign housing deduction,
some later date you expect it to last longer than
the terms “foreign,” “abroad,” and “overseas”
Guam and the Commonwealth of the North-
1 year, it is temporary (in the absence of facts
refer to areas outside the United States and
ern Mariana Islands. An exclusion will be
and circumstances indicating otherwise) until
Chapter 4 Foreign Earned Income and Housing: Exclusion – Deduction
Page 13
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