Tax Homes and Foreign Earned Income Exclusion

What is a “tax home” and “abode” for purposed of the Foreign Earned Income Exclusion? Why is this important? 

 

If it is established that you have an abode in the U.S., you will not qualify for the foreign earned income exclusion. Your abode is generally where you live or have your strongest economic, familial, and personal ties. You will not be treated as having a tax home in a foreign country when your abode is in the U.S., unless you are serving in an active combat zone.

 

If you have children and a spouse, for example, in the U.S., and you have a U.S. bank account and residence, your work is the only thing tying you to the foreign country, it will be difficult to qualify for a foreign earned income exclusion.

Your tax home in contrast usually applies to your vocation or business and is generally referred to as the location of your regular or principal place of business as defined in IRC Section 162(a)(2).     

 

Additionally, you may have a tax home in a foreign country, but closer ties to your abode in the U.S. You will not qualify for the foreign earned income exclusion if this is the case. You must establish an abode in the foreign country as well where the link is stronger to that foreign country. In other words, your time in the foreign country cannot seem transitory in nature.

 

 

To learn more, please visit our international tax page: https://abfinllc.mysites.io/international-tax-services/