330+ Days Outside The US = No Income Tax

If you are a US citizen, living outside the US, then all your income may not be taxed. Yes, if you live as an expat, then at tax filing time, you can file the “Foreign Income Exclusion” form, number 2555.

But, there’s a catch. (Isn’t there always a catch?) The catch is, you must really be living outside the United States for 90% or more of the time (that works to be 330 days or more). It doesn’t mean just calling your expat home your “Primary residence.” It doesn’t mean come home again for “just” the summer months. Nope, for your income to be excluded from tax, you must stay clear of the US for 330 days or more.

This is on my mind because someone just wrote to me asking the same questions. She asked how (or if) they can visit the United States and how it affects their taxes. I answered her, but then I thought others may be wondering the same thing. So, here is my reply:

Yes, about spending 35 days in the US, it’s true, unfortunately. If
someone spends 35 days in the US, they are then ineligible for foreign
income exclusion. It’s part of the physical presence test and I agree
it stinks.

I think the actual IRS text reads that you must be outside the US for
330 days, but it’s the same. It’s more important to understand that
those 35 days are cumulative and not consecutive. Also, understand
that the 35 days is over *any* span of 12 months, not just calendar
year.
So, as a detailed example, someone fails the physical presence test if
their vacations were:

  • July 2011 – 5 days
  • December 2011 – 20 days
  • May 2012 – 10 days
  • June 2012 – 5 days

—–that’s 40 days within 12 months, failing the test. My wife and I have been super careful in counting our days spent over the past 6-7 years outside the US. We never go over 33 (including the entry/exit days in travel). One flight delay could cost us thousands, as you
know.

Of course, I have to add that I am not a financial expert. All the above comes from years of experience as an expat, but not as a financial planner, tax attorney or some other professionally licensed money guru.

Hope this can help at least someone else out there.

Lastly, here’s a flowchart graphic I stole from the IRS. At least it’s less confusing than the 7000 pages of tax code.

14999e01

 

 

Expat Program Released: Gone in 1 Year

If you or someone you know wants to move overseas, I just launched a program guaranteeing success. Based on years of consulting, I created a step-by-step program: tools, guidance and ‘homework’ (consulting). By the end, you’re moving overseas, employed and secure, or money back, guaranteed.

Check out “Gone in 1 Year” here.

Published by

Jeff

An American who likes to move around. I now live on the eastern Canadian seaboard. My job? A stay-at-home dad for two cute but demanding bosses. My wife? Also cute; not so demanding. My wife and I both love travel. We met in South Korea, travelled across Australia, India, Europe and beyond. We lived in Czech Republic for four years. Many stories to tell and experience to share. If you let me, I will help you travel as we do. Enjoy.

66 thoughts on “330+ Days Outside The US = No Income Tax”

    1. Hi Ed, thanks for your question.
      It doesn’t matter if a person is a govt employee at all. It’s only relevant to US citizens. If a US citizen, then you need to file the applicable forms. Stay out for 330 days, and pass the physical residence test.

      Best,
      -Jeff

      1. You are incorrect, and that is very important to know. I am like you, a person who spends a lot of time outside the U.S. and you are correct with what you had stated initially. HOWEVER, it DOES matter if someone is a government employee and I know this from experience. Having worked as a contractor for security companies I was eligible for the 330 rule as we call it and I have taken advantage of it. Unfortunately, I took a job with the Department of State as a direct hire, nobody told me however after I had the job I looked up and I was now unable to qualify for the 330 rule because I was a government employee. That made a big difference because the tax break I am used to getting when I do qualify for the 330 is over $20,000 a year. I didnt take anyone’s word for it, I found it and read up on it myself. I am not an expert by any means but I know this for a fact. Now that I am back as a regular contractor I am again going for my 330 which I will have met the requirements on Dec 13 2014.

        1. As a reminder, make sure that you count only the days that you spend the entire 24 hours outside of the U.S. You have to be aware of the times when you land etc. No time will count over international waters which is why I try to land in a foreign country quick and then take a long flight because as soon as a land in a foreign country I can then start the following day to count as time outside of the U.S. This will save you a day on your travel if you are going long distances and if your numbers are tight. Something that was brought up and that you will need to speak to an expert on would be if you come back to the states and you earn money here. I am no expert but was mentioned earlier was that you might not be eligible but may be able to count the portion of money earned outside of the U.S.

          1. Let’s say I fly from the US on the 10th, land in Hong Kong for a connection at 7:30pm on the 11th. From there I go to Bangkok and land at 11:50pm. Having not gone through immigration and staying only in airports, would I have to count the 12th as a travel day as well? Or is it once I land in HK, I’m considered outside of the US, so the 12th would be a full day?

      2. Hi Jeff,

        I got a job offer in Singapore from an american company. The job will require lots of communication and travel to the HQ in the US. So most likely I will not meet the 330 days requirement nor the bona fide residence test since US and SG doesn’t have a treaty for individuals.

        Thanks for your help in advance!

  1. Hi, I have a job offer with a salary package of basic salary + house allowance. Do you know if I can claim both the foreign earned income exclusion and housing allowance exclusion. If I start my new job in March 1st 2014 , will I not be allowed foreign income exclusion when I file my tax in 2015 April? (Let us say I didn’t make any US visit until April). If not, then I will have to start my job in Feb 1st.

    1. Hello Saleem,
      We’ve talked a few times over e-mail. Very welcome, happy to have helped.

      To anyone else, I can help based on several years experience. But I’m obliged to add that I’m not a finance professional, a tax advisor or a securities professional, so my advice or answers can be only accepted as opinion.

  2. Hi there. I’ve been a US expat living in Singapore for the past 5 years. In a few months, as part of my new job, I will be spending 2 to 3 weeks in NYC for training. By then, I’ll have already spend 2 weeks in the US (personal trip), but I also need to do another personal trip in the fall. Does “work” count towards the 35-day limit?

    1. hey Gary,

      Great comment. Now, I am not a finance professional and can’t give professional advice.
      That said, be wary that your time spent in NYC might count as US-based income. Even though its training, you might have to calculate a proportional slice of salary, and consider it as income not excluded.

      Just saying,
      -Jeff

  3. Hi I haven’t been back in a year and have a job here, in Australia, I’m a permanent resident, I’m never going to live in the us again so do I really need to file? I don’t earn very much- I got about 25,000 taxable alimony before I left but I have 2 dependants, for the year 2012 2013 it was 20,000. It seems so complicated should I bother? I have no money in any bank accounts lol

    1. Yes. Yes. Yes. Sorry Rebecca, but yes.
      I have to reply because I don’t want anyone only reading your comment “It seems so complicated…should I bother?” Yes, it’s complicated, and yes you should.
      If you’re an American, you must fill out and file the right tax forms, period. It doesn’t matter where you live, nor for how long. For US citizens, it’s a life sentence. (Now you get why more and more US citizens are renouncing citizenship?)

      Now, a quick disclaimer: I’m not a tax professional, or some certified finance expert. So, I’m sharing just my opinion, not advice.
      But if you don’t believe me, believe the IRS, the US Treasury and the press.

      The good news is, you very likely owe nothing. All your income will be excluded as taxable income. The only money you’ll have to pay is to an accountant who knows what they’re doing.
      Have any bank accounts overseas? (with or without money) Don’t forget the FBAR.

      Need a recommendation on who to contact for professional help? I’ll give on request.

      Best,
      -Jeff

  4. Jeff,
    I am an A&P mech military contractor in Kabul. My deployment is 6 months, could be extended to 9. Do I qualify for tax exemption if I stay outta U.S. regardless If I am still working? My agreement contract says only 6mo and I read somewhere that the assignment must be longer then a year to qualify. Yet, I have heard of contractors staying in other countries (example: Thailand, etc) to wait out their 330 days.. Will I qualify If i do so?
    Thanks for any insight, Josh R.

    1. Hi Josh,
      My apologies for so late a reply!

      The answer is Yes – you do need to be physically out of the US for that 330 day rule to apply to you. Whether you’re working or not is irrelevant (unless you’re earning that income in the US).
      If you’re earning outside and you’re physically outside for 330+ days, you’re set.

      -j

  5. Jeff,

    I’m planning to leave the U.S. this July to find work in another country. It looks like I won’t be able to get a tax exemption. Is it a nightmare to file taxes outside the States? I know for a fact that the IRS owes me money when I file my taxes for 2014, and is it possible that I can receive that money while I’m outside the States? Have you ever used TurboTax/TaxAct to file your taxes online?

    Thanks.

      1. Jeff,

        Thank you for your reply and your recommendation, but lets say I can’t afford a professional to do it for me, is there another option that you recommend?

        Btw, I’m planning to teach in Cambodia.

        Thanks.

        1. hey John,

          As I’m not a financial professional, I can’t advise how & what to file. (yes, I’m being careful to say this up front on purpose)

          Also, know that a LOT of expats simply…. don’t. They simply don’t bother with filing because it’s that complicated. I agree that, at first, it is complicated.
          But the trend nowadays is enforcement by the IRS & US Treasury. And unfortunately the requirements change “just enough” every year to keep us all a bit on edge.

          Again, I can’t tell you what to do, or not do. But I’m motivated now to create a solid, helpful post on how to navigate the filing requirements.

          Best of luck in Cambodia. First year teaching?

          -jeff

  6. Jeff,

    If I come back to the states, and take a cruise to the caribbean (international waters) which days count against me ??

    Bill

  7. Jeff,

    I notice there was no mention of “bona-fide residency” (as shown in the diagram). I’m guessing that for people who live in and are citizens of another country, that they won’t have the 35 day limit – is that true? I ask because I might have to visit the US for a month or two.

    Thanks!

    1. Actually, I may have found the answer – sharing for you and your readers. From Wikipedia:

      “To pass the bona fide residency test, the individual needs to reside within a foreign country for an entire tax year, defined as January 1 through December 31. The individual is allowed to leave this country for brief trips back to the U.S, or somewhere else for either vacation or business. However, the individual needs to have a “clear intention” of returning to the country from the trips. The individual’s bona fide residence can include an entire tax year and parts of two other tax years.”

      http://en.wikipedia.org/wiki/Bona_fide_resident_test

      1. Thanks Matt. That’s helpful information. I often use Wikipedia also to reassure what I know to be fact. That said, I almost never rely on Wikipedia to “win” over more reliable sources if/when there’s a conflict. (Bare in mind, updates to Wikipedia are crowd-sourced)

        1. I agree, it is important not to rely solely on Wikipedia without checking with a reliable source. “Bona fide residency” has a number of conditions that an expat will need to be aware of when determining their own status. Here’s the relevant IRS page:

          http://www.irs.gov/Individuals/International-Taxpayers/Foreign-Earned-Income-Exclusion—Bona-Fide-Residence-Test

          In my case, it has been 15 years since my last visit to the US and I have dual-citizenship, so I’m able to take advantage of it. Considering how complicated expat taxes can be, I’m happy to see that I’ll be able to spend more than a month visiting without it affecting my exemption status.

  8. Hey, so i have a commuter contract with an american oil service company I am on rotation so every 28 days I get a flight back home to Ohio. But I can change my ticket if I want (which I am planning on doing so I stay out of the U.S for 330 days). My permanent address is in Ohio but I will not physically be there (it’s actually my brother’s place). Am I required to pay taxes?

  9. Hello,
    I am working outside the US for an American Construction Firm. If I get paid in the US “the company deposits my salary in my US bank account. Would that still be considered foreign income since Iam out the US?
    Thanks

  10. I think that is important for you all to know the IRS’s policy for the 330-day rule. When I first deployed to Afghanistan as a US military contractor, I assumed that I did not qualify for the 330 day rule because I got here 4 April 2015. Contrary to popular belief the IRS website states the following:

    “How To Figure The 12-month Period
    There are four rules you should know when figuring the 12-month period:
    Your 12-month period can begin with any day of the month. It ends the day before the same calendar day, 12 months later
    Your 12-month period must be made up of consecutive months. Any 12-month period can be used if the 330 days in a foreign country fall within that period
    You do not have to begin your 12-month period with your first full day in a foreign country or to end it with the day you leave. You can choose the 12-month period that gives you the greatest exclusion
    In determining whether the 12-month period falls within a longer stay in the foreign country, 12-month periods can overlap one another
    Example 1:
    You are a construction worker who works from time to time in a foreign country over a 20-month period. You might pick up the 330 full days in a 12-month period only during the middle months of the time you work in the foreign country because the first few and last few months of the 20-month period are broken up by long visits to the United States.
    Example 2:
    You work in New Zealand for a 20-month period from January 1, 2011, through August 31, 2012, except that you spend 28 days in February 2011 and 28 days in February 2012 on vacation in the United States. You are present in New Zealand 330 full days during each of the following two 12-month periods: January 1, 2011 – December 31, 2011, and September 1, 2011 – August 31, 2012. By overlapping the 12-month periods in this way, you meet the physical presence test for the whole 20-month period. Refer to Chapter 4, Figure 4-B in Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad.”-http://www.irs.gov/Individuals/International-Taxpayers/Foreign-Earned-Income-Exclusion—Physical-Presence-Test

    For those of you who might not understand the examples, their website basically states that if you go on vacation after 10 months of being abroad for “28 consecutive days” in the US and you return to the country you are working in before the 34th day of being on vacation, you are fine. As long as you are away from the US for a period of 12 consecutive months with no more than 35 days in the US, you qualify for the tax break. An example would be a period from April 2015 to July 2016 with a 30-day vacation in the US, because you were away for a 12 month period.

    Hope this helps.

  11. I’ve read most of the comments and interactions but I might have missed a few details if someone brought it up, forgive me in advance. My questions is, assuming I fit into this 330 days overseas and I’m eligible, how does the taxes work initially and after its confirmed you’ve done it right. Do you pay taxes initially…up to say 100k, then its tax free, then you collect the rest (of that 100k taxed) at tax season? thanks

    1. Hi David,

      First, I have to say I’m not a financial professional, so I don’t advise how & what to file. I know you already read that above, but it’s important for my own liability to not portray myself as a paid tax expert or financial services expert.

      From my experience and my interpretation of IRS tax instructions (http://www.irs.gov/uac/Form-2555,-Foreign-Earned-Income), you don’t pay taxes up front, then “collect” them back, based on their exclusion. (If I understand your question right).

      Maybe your confusion comes from the word *exclusion.* The IRS has made it more an *applied credit,* based on a certain calculation. For a detailed explanation of how its calculated, I’d recommend going straight to the source – the 2555 form instructions.

      Anyway, like you know, whether you’re eligible depends on the two ‘simple’ tests: being a genuine resident and having physical presence. So, that determines how you file. There’s no “confirmation” done by the IRS as part of the filing. You’re either eligible or not. (Of course, if by some red flag you were audited and eligibility determined wrongly, then … yeah.)

      Again, I can’t legitimately advise you, but I will recommend one expert. That’s John Mohr of Tax Atoll (http://www.taxatoll.com). Yes, this is a blatant plug, but it’s because I absolutely trust this firm and its founder. We file taxes annually in 3 countries (US, Czech Rep. and Canada). John manages our filing for 2 of them these past 10 years as of 2015.

      Hope that’s helpful David.
      -Jeff

  12. Jeff, I appreciate the info. I wouldn’t hold you to this legally of course..even if I could. I have a job possibility in Afghanistan that is specifically for 1 year plus, so that probably makes me eligible as you mentioned (i’m either eligible or not)

  13. I am quitting this unbearable and shitty foreign job after about 8 months.

    The pay is US level but it’s in an extremely low tax country. So my US tax could be significant.

    So I guess I really need to stay another 4 months away from the US? No choice around it?

    1. hey Art,

      Above anything else I say, you should talk to an accountant well versed in expat taxation. I’m a blogger, not a financial pro. Small difference, I know, haha, but I have to say that.

      In my opinion, you qualify. While you were NOT away an “entire tax year” (a calendar year), you might have been away for 330 days during a 12-month period (you said “from April to March”).

      Check out the flowchart at the bottom of the post. You’ll see you do qualify, provided your time out of the country was 330 or more days (11 full months).

      Best (and only) advice I can give is talk to the accountant who will do your taxes that year. And I will only recommend one person, John Mohr of Tax Atoll (http://www.taxatoll.com)

    2. I don’t know about the visas, but I heard on the news that the big Swiss travel agcenies are offering rebookings for clients with upcoming trips to Thailand and are strongly urging people not to travel to Thailand at this time.I hope everything stays calm for you and your family.

  14. If it is possible to end the 12 month physical presence test in the following year, is it also possible to start the 12 month period in the previous year? For example for tax year 2015, can I choose October 2014-October 2015? Its the same things as choosing February 2015-Febraury 2016 to the IRS, right?

  15. Do you mind if I quote a couple of of your content articles but I offer credit score and sources back to your site? My site is in the really same region of curiosity as yours and my visitors would surely benefit from some of the information you present here. Please allow me know if this okay with you. Cheers!

    https://middleasttravel.wordpress.com/

  16. Hi Jeff,
    Can you tell me how expat travel is accounted for? I’ve been living in Mexico for two years. For this year’s filing, my CPA asked if I’d returned to the U.S. and to CA last year. I said I hadn’t, which is true. However, what if I had. How is travel accounted for? If I’d traveled to the U.S., perhaps for more than the aceptable time limit, yet lied to the C.P.A, who would find out?

    1. Hi Cathy, thanks for your comment and question.

      When you ask how it is “accounted for,” do you mean how is it tracked? Apart from at the border?

      Who would find out? The Customs and Border Protection people obviously know first. The CBP are the guys and gals in blue to whom you pass your passport, when you’re coming in from Mexico (or any border crossing).

      Now, your next question might be “Yes, but the CBP and IRS really talk to each other?”
      Answer: yes.

      I could talk at length about this, but instead I’ll drop this link.
      http://www.nestmann.com/why-the-irs-can-now-ground-you#.Vw2OV6QrKhc

      Sleep well.

  17. Hi,

    I’m in the midst of planning to move overseas for a job. Lets say if i start my job overseas on 1 November, for sure i fail the 330 days test. Whats your recommended path of filing my tax or the presence test/bone fide resident test…. i’m really confused about how they test the 330days. I would need to file the tax by April, does this mean i’ll be taxed in the US for November and December?

Leave a Reply

Your email address will not be published.