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My pay 4. My pay   Foreign Earned Income and Housing: Exclusion – Deduction Table of Contents Topics - This chapter discusses: Useful Items - You may want to see: Who Qualifies for the Exclusions and the Deduction? RequirementsTax Home in Foreign Country Bona Fide Residence Test Physical Presence Test Waiver of Time Requirements U. My pay S. My pay Travel Restrictions Foreign Earned Income Foreign Earned Income ExclusionLimit on Excludable Amount Choosing the Exclusion Foreign Housing Exclusion and DeductionHousing Amount Foreign Housing Exclusion Foreign Housing Deduction Married Couples Form 2555 and Form 2555-EZForm 2555-EZ Form 2555 Topics - This chapter discusses: Who qualifies for the foreign earned income exclusion, the foreign housing exclusion, and the foreign housing deduction, The requirements that must be met to claim either exclusion or the deduction, How to figure the foreign earned income exclusion, and How to figure the foreign housing exclusion and the foreign housing deduction. My pay Useful Items - You may want to see: Publication 519 U. My pay S. My pay Tax Guide for Aliens 570 Tax Guide for Individuals With Income from U. My pay S. My pay Possessions 596 Earned Income Credit (EIC) Form (and Instructions) 1040X Amended U. My pay S. My pay Individual Income Tax Return 2555 Foreign Earned Income 2555-EZ Foreign Earned Income Exclusion See chapter 7 for information about getting these publications and forms. My pay Who Qualifies for the Exclusions and the Deduction? If you meet certain requirements, you may qualify for the foreign earned income and foreign housing exclusions and the foreign housing deduction. My pay If you are a U. My pay S. My pay citizen or a resident alien of the United States and you live abroad, you are taxed on your worldwide income. My pay However, you may qualify to exclude from income up to $97,600 of your foreign earnings. My pay In addition, you can exclude or deduct certain foreign housing amounts. My pay See Foreign Earned Income Exclusion and Foreign Housing Exclusion and Deduction, later. My pay You also may be entitled to exclude from income the value of meals and lodging provided to you by your employer. My pay See Exclusion of Meals and Lodging, later. My pay Requirements To claim the foreign earned income exclusion, the foreign housing exclusion, or the foreign housing deduction, you must meet all three of the following requirements. My pay Your tax home must be in a foreign country. My pay You must have foreign earned income. My pay You must be one of the following. My pay A U. My pay S. My pay citizen who is a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax year. My pay A U. My pay S. My pay resident alien who is a citizen or national of a country with which the United States has an income tax treaty in effect and who is a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax year. My pay A U. My pay S. My pay citizen or a U. My pay S. My pay resident alien who is physically present in a foreign country or countries for at least 330 full days during any period of 12 consecutive months. My pay See Publication 519 to find out if you are a U. My pay S. My pay resident alien for tax purposes and whether you keep that alien status when you temporarily work abroad. My pay If you are a nonresident alien married to a U. My pay S. My pay citizen or resident alien, and both you and your spouse choose to treat you as a resident alien, you are a resident alien for tax purposes. My pay For information on making the choice, see the discussion in chapter 1 under Nonresident Alien Spouse Treated as a Resident . My pay Waiver of minimum time requirements. My pay   The minimum time requirements for bona fide residence and physical presence can be waived if you must leave a foreign country because of war, civil unrest, or similar adverse conditions in that country. My pay This is fully explained under Waiver of Time Requirements , later. My pay   See Figure 4-A and information in this chapter to determine if you are eligible to claim either exclusion or the deduction. My pay Tax Home in Foreign Country To qualify for the foreign earned income exclusion, the foreign housing exclusion, or the foreign housing deduction, your tax home must be in a foreign country throughout your period of bona fide residence or physical presence abroad. My pay Bona fide residence and physical presence are explained later. My pay Tax Home Your tax home is the general area of your main place of business, employment, or post of duty, regardless of where you maintain your family home. My pay Your tax home is the place where you are permanently or indefinitely engaged to work as an employee or self-employed individual. My pay Having a “tax home” in a given location does not necessarily mean that the given location is your residence or domicile for tax purposes. My pay If you do not have a regular or main place of business because of the nature of your work, your tax home may be the place where you regularly live. My pay If you have neither a regular or main place of business nor a place where you regularly live, you are considered an itinerant and your tax home is wherever you work. My pay You are not considered to have a tax home in a foreign country for any period in which your abode is in the United States. My pay However, your abode is not necessarily in the United States while you are temporarily in the United States. My pay Your abode is also not necessarily in the United States merely because you maintain a dwelling in the United States, whether or not your spouse or dependents use the dwelling. My pay “Abode” has been variously defined as one's home, habitation, residence, domicile, or place of dwelling. My pay It does not mean your principal place of business. My pay “Abode” has a domestic rather than a vocational meaning and does not mean the same as “tax home. My pay ” The location of your abode often will depend on where you maintain your economic, family, and personal ties. My pay Example 1. My pay You are employed on an offshore oil rig in the territorial waters of a foreign country and work a 28-day on/28-day off schedule. My pay You return to your family residence in the United States during your off periods. My pay You are considered to have an abode in the United States and do not satisfy the tax home test in the foreign country. My pay You cannot claim either of the exclusions or the housing deduction. My pay Example 2. My pay For several years, you were a marketing executive with a producer of machine tools in Toledo, Ohio. My pay In November of last year, your employer transferred you to London, England, for a minimum of 18 months to set up a sales operation for Europe. My pay Before you left, you distributed business cards showing your business and home addresses in London. My pay You kept ownership of your home in Toledo but rented it to another family. My pay You placed your car in storage. My pay In November of last year, you moved your spouse, children, furniture, and family pets to a home your employer rented for you in London. My pay Shortly after moving, you leased a car and you and your spouse got British driving licenses. My pay Your entire family got library cards for the local public library. My pay You and your spouse opened bank accounts with a London bank and secured consumer credit. My pay You joined a local business league and both you and your spouse became active in the neighborhood civic association and worked with a local charity. My pay Your abode is in London for the time you live there. My pay You satisfy the tax home test in the foreign country. My pay Please click here for the text description of the image. My pay Figure 4–A Can I Claim the Exclusion or Deduction? Temporary or Indefinite Assignment The location of your tax home often depends on whether your assignment is temporary or indefinite. My pay If you are temporarily absent from your tax home in the United States on business, you may be able to deduct your away-from-home expenses (for travel, meals, and lodging), but you would not qualify for the foreign earned income exclusion. My pay If your new work assignment is for an indefinite period, your new place of employment becomes your tax home and you would not be able to deduct any of the related expenses that you have in the general area of this new work assignment. My pay If your new tax home is in a foreign country and you meet the other requirements, your earnings may qualify for the foreign earned income exclusion. My pay If you expect your employment away from home in a single location to last, and it does last, for 1 year or less, it is temporary unless facts and circumstances indicate otherwise. My pay If you expect it to last for more than 1 year, it is indefinite. My pay If you expect it to last for 1 year or less, but 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. My pay Once your expectation changes, it is indefinite. My pay Foreign Country To meet the bona fide residence test or the physical presence test, you must live in or be present in a foreign country. My pay A foreign country includes any territory under the sovereignty of a government other than that of the United States. My pay The term “foreign country” includes the country's airspace and territorial waters, but not international waters and the airspace above them. My pay It also includes the seabed and subsoil of those submarine areas adjacent to the country's territorial waters over which it has exclusive rights under international law to explore and exploit the natural resources. My pay The term “foreign country” does not include Antarctica or U. My pay S. My pay possessions such as Puerto Rico, Guam, the Commonwealth of the Northern Mariana Islands, the U. My pay S. My pay Virgin Islands, and Johnston Island. My pay For purposes of the foreign earned income exclusion, the foreign housing exclusion, and the foreign housing deduction, the terms “foreign,” “abroad,” and “overseas” refer to areas outside the United States and those areas listed or described in the previous sentence. My pay American Samoa, Guam, and the Commonwealth of the Northern Mariana Islands Residence or presence in a U. My pay S. My pay possession does not qualify you for the foreign earned income exclusion. My pay You may, however, qualify for an exclusion of your possession income on your U. My pay S. My pay return. My pay American Samoa. My pay   There is a possession exclusion available to individuals who are bona fide residents of American Samoa for the entire tax year. My pay Gross income from sources within American Samoa may be eligible for this exclusion. My pay Income that is effectively connected with the conduct of a trade or business within American Samoa also may be eligible for this exclusion. My pay Use Form 4563, Exclusion of Income for Bona Fide Residents of American Samoa, to figure the exclusion. My pay Guam and the Commonwealth of the Northern Mariana Islands. My pay   An exclusion will be available to residents of Guam and the Commonwealth of the Northern Mariana Islands if, and when, new implementation agreements take effect between the United States and those possessions. My pay   For more information, see Publication 570. My pay Puerto Rico and U. My pay S. My pay Virgin Islands Residents of Puerto Rico and the U. My pay S. My pay Virgin Islands cannot claim the foreign earned income exclusion or the foreign housing exclusion. My pay Puerto Rico. My pay   Generally, if you are a U. My pay S. My pay citizen who is a bona fide resident of Puerto Rico for the entire tax year, you are not subject to U. My pay S. My pay tax on income from Puerto Rican sources. My pay This does not include amounts paid for services performed as an employee of the United States. My pay However, you are subject to U. My pay S. My pay tax on your income from sources outside Puerto Rico. My pay In figuring your U. My pay S. My pay tax, you cannot deduct expenses allocable to income not subject to tax. My pay Bona Fide Residence Test You meet the bona fide residence test if you are a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax year. My pay You can use the bona fide residence test to qualify for the exclusions and the deduction only if you are either: A U. My pay S. My pay citizen, or A U. My pay S. My pay resident alien who is a citizen or national of a country with which the United States has an income tax treaty in effect. My pay You do not automatically acquire bona fide resident status merely by living in a foreign country or countries for 1 year. My pay If you go to a foreign country to work on a particular job for a specified period of time, you ordinarily will not be regarded as a bona fide resident of that country even though you work there for 1 tax year or longer. My pay The length of your stay and the nature of your job are only two of the factors to be considered in determining whether you meet the bona fide residence test. My pay Bona fide residence. My pay   To meet the bona fide residence test, you must have established a bona fide residence in a foreign country. My pay   Your bona fide residence is not necessarily the same as your domicile. My pay Your domicile is your permanent home, the place to which you always return or intend to return. My pay Example. My pay You could have your domicile in Cleveland, Ohio, and a bona fide residence in Edinburgh, Scotland, if you intend to return eventually to Cleveland. My pay The fact that you go to Scotland does not automatically make Scotland your bona fide residence. My pay If you go there as a tourist, or on a short business trip, and return to the United States, you have not established bona fide residence in Scotland. My pay But if you go to Scotland to work for an indefinite or extended period and you set up permanent quarters there for yourself and your family, you probably have established a bona fide residence in a foreign country, even though you intend to return eventually to the United States. My pay You are clearly not a resident of Scotland in the first instance. My pay However, in the second, you are a resident because your stay in Scotland appears to be permanent. My pay If your residency is not as clearly defined as either of these illustrations, it may be more difficult to decide whether you have established a bona fide residence. My pay Determination. My pay   Questions of bona fide residence are determined according to each individual case, taking into account factors such as your intention, the purpose of your trip, and the nature and length of your stay abroad. My pay   To meet the bona fide residence test, you must show the Internal Revenue Service (IRS) that you have been a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax year. My pay The IRS decides whether you are a bona fide resident of a foreign country largely on the basis of facts you report on Form 2555. My pay IRS cannot make this determination until you file Form 2555. My pay Statement to foreign authorities. My pay   You are not considered a bona fide resident of a foreign country if you make a statement to the authorities of that country that you are not a resident of that country, and the authorities: Hold that you are not subject to their income tax laws as a resident, or Have not made a final decision on your status. My pay Special agreements and treaties. My pay   An income tax exemption provided in a treaty or other international agreement will not in itself prevent you from being a bona fide resident of a foreign country. My pay Whether a treaty prevents you from becoming a bona fide resident of a foreign country is determined under all provisions of the treaty, including specific provisions relating to residence or privileges and immunities. My pay Example 1. My pay You are a U. My pay S. My pay citizen employed in the United Kingdom by a U. My pay S. My pay employer under contract with the U. My pay S. My pay Armed Forces. My pay You are not subject to the North Atlantic Treaty Status of Forces Agreement. My pay You may be a bona fide resident of the United Kingdom. My pay Example 2. My pay You are a U. My pay S. My pay citizen in the United Kingdom who qualifies as an “employee” of an armed service or as a member of a “civilian component” under the North Atlantic Treaty Status of Forces Agreement. My pay You are not a bona fide resident of the United Kingdom. My pay Example 3. My pay You are a U. My pay S. My pay citizen employed in Japan by a U. My pay S. My pay employer under contract with the U. My pay S. My pay Armed Forces. My pay You are subject to the agreement of the Treaty of Mutual Cooperation and Security between the United States and Japan. My pay Being subject to the agreement does not make you a bona fide resident of Japan. My pay Example 4. My pay You are a U. My pay S. My pay citizen employed as an “official” by the United Nations in Switzerland. My pay You are exempt from Swiss taxation on the salary or wages paid to you by the United Nations. My pay This does not prevent you from being a bona fide resident of Switzerland. My pay Effect of voting by absentee ballot. My pay   If you are a U. My pay S. My pay citizen living abroad, you can vote by absentee ballot in any election held in the United States without risking your status as a bona fide resident of a foreign country. My pay   However, if you give information to the local election officials about the nature and length of your stay abroad that does not match the information you give for the bona fide residence test, the information given in connection with absentee voting will be considered in determining your status, but will not necessarily be conclusive. My pay Uninterrupted period including entire tax year. My pay   To meet the bona fide residence test, you must reside in a foreign country or countries for an uninterrupted period that includes an entire tax year. My pay An entire tax year is from January 1 through December 31 for taxpayers who file their income tax returns on a calendar year basis. My pay   During the period of bona fide residence in a foreign country, you can leave the country for brief or temporary trips back to the United States or elsewhere for vacation or business. My pay To keep your status as a bona fide resident of a foreign country, you must have a clear intention of returning from such trips, without unreasonable delay, to your foreign residence or to a new bona fide residence in another foreign country. My pay Example 1. My pay You arrived with your family in Lisbon, Portugal, on November 1, 2011. My pay Your assignment is indefinite, and you intend to live there with your family until your company sends you to a new post. My pay You immediately established residence there. My pay You spent April of 2012 at a business conference in the United States. My pay Your family stayed in Lisbon. My pay Immediately following the conference, you returned to Lisbon and continued living there. My pay On January 1, 2013, you completed an uninterrupted period of residence for a full tax year (2012), and you meet the bona fide residence test. My pay Example 2. My pay Assume the same facts as in Example 1, except that you transferred back to the United States on December 13, 2012. My pay You would not meet the bona fide residence test because your bona fide residence in the foreign country, although it lasted more than a year, did not include a full tax year. My pay You may, however, qualify for the foreign earned income exclusion or the housing exclusion or deduction under the physical presence test (discussed later). My pay Bona fide resident for part of a year. My pay   Once you have established bona fide residence in a foreign country for an uninterrupted period that includes an entire tax year, you are a bona fide resident of that country for the period starting with the date you actually began the residence and ending with the date you abandon the foreign residence. My pay Your period of bona fide residence can include an entire tax year plus parts of 2 other tax years. My pay Example. My pay You were a bona fide resident of Singapore from March 1, 2011, through September 14, 2013. My pay On September 15, 2013, you returned to the United States. My pay Since you were a bona fide resident of a foreign country for all of 2012, you were also a bona fide resident of a foreign country from March 1, 2011, through the end of 2011 and from January 1, 2013, through September 14, 2013. My pay Reassignment. My pay   If you are assigned from one foreign post to another, you may or may not have a break in foreign residence between your assignments, depending on the circumstances. My pay Example 1. My pay You were a resident of Pakistan from October 1, 2012, through November 30, 2013. My pay On December 1, 2013, you and your family returned to the United States to wait for an assignment to another foreign country. My pay Your household goods also were returned to the United States. My pay Your foreign residence ended on November 30, 2013, and did not begin again until after you were assigned to another foreign country and physically entered that country. My pay Since you were not a bona fide resident of a foreign country for the entire tax year of 2012 or 2013 you do not meet the bona fide residence test in either year. My pay You may, however, qualify for the foreign earned income exclusion or the housing exclusion or deduction under the physical presence test, discussed later. My pay Example 2. My pay Assume the same facts as in Example 1, except that upon completion of your assignment in Pakistan you were given a new assignment to Turkey. My pay On December 1, 2013, you and your family returned to the United States for a month's vacation. My pay On January 2, 2014, you arrived in Turkey for your new assignment. My pay Because you did not interrupt your bona fide residence abroad, you meet the bona fide residence test. My pay Physical Presence Test You meet the physical presence test if you are physically present in a foreign country or countries 330 full days during a period of 12 consecutive months. My pay The 330 days do not have to be consecutive. My pay Any U. My pay S. My pay citizen or resident alien can use the physical presence test to qualify for the exclusions and the deduction. My pay The physical presence test is based only on how long you stay in a foreign country or countries. My pay This test does not depend on the kind of residence you establish, your intentions about returning, or the nature and purpose of your stay abroad. My pay 330 full days. My pay   Generally, to meet the physical presence test, you must be physically present in a foreign country or countries for at least 330 full days during a 12-month period. My pay You can count days you spent abroad for any reason. My pay You do not have to be in a foreign country only for employment purposes. My pay You can be on vacation. My pay   You do not meet the physical presence test if illness, family problems, a vacation, or your employer's orders cause you to be present for less than the required amount of time. My pay Exception. My pay   You can be physically present in a foreign country or countries for less than 330 full days and still meet the physical presence test if you are required to leave a country because of war or civil unrest. My pay See Waiver of Time Requirements, later. My pay Full day. My pay   A full day is a period of 24 consecutive hours, beginning at midnight. My pay Travel. My pay    When you leave the United States to go directly to a foreign country or when you return directly to the United States from a foreign country, the time you spend on or over international waters does not count toward the 330-day total. My pay Example. My pay You leave the United States for France by air on June 10. My pay You arrive in France at 9:00 a. My pay m. My pay on June 11. My pay Your first full day of physical presence in France is June 12. My pay Passing over foreign country. My pay   If, in traveling from the United States to a foreign country, you pass over a foreign country before midnight of the day you leave, the first day you can count toward the 330-day total is the day following the day you leave the United States. My pay Example. My pay You leave the United States by air at 9:30 a. My pay m. My pay on June 10 to travel to Kenya. My pay You pass over western Africa at 11:00 p. My pay m. My pay on June 10 and arrive in Kenya at 12:30 a. My pay m. My pay on June 11. My pay Your first full day in a foreign country is June 11. My pay Change of location. My pay   You can move about from one place to another in a foreign country or to another foreign country without losing full days. My pay 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. My pay Example 1. My pay You leave Ireland by air at 11:00 p. My pay m. My pay on July 6 and arrive in Sweden at 5:00 a. My pay m. My pay on July 7. My pay Your trip takes less than 24 hours and you lose no full days. My pay Example 2. My pay You leave Norway by ship at 10:00 p. My pay m. My pay on July 6 and arrive in Portugal at 6:00 a. My pay m. My pay on July 8. My pay Since your travel is not within a foreign country or countries and the trip takes more than 24 hours, you lose as full days July 6, 7, and 8. My pay If you remain in Portugal, your next full day in a foreign country is July 9. My pay In United States while in transit. My pay   If you are in transit between two points outside the United States and are physically present in the United States for less than 24 hours, you are not treated as present in the United States during the transit. My pay You are treated as traveling over areas not within any foreign country. My pay    Please click here for the text description of the image. My pay Figure 4-B How to figure the 12-month period. My pay   There are four rules you should know when figuring the 12-month period. My pay Your 12-month period can begin with any day of the month. My pay It ends the day before the same calendar day, 12 months later. My pay Your 12-month period must be made up of consecutive months. My pay Any 12-month period can be used if the 330 days in a foreign country fall within that period. My pay You do not have to begin your 12-month period with your first full day in a foreign country or end it with the day you leave. My pay You can choose the 12-month period that gives you the greatest exclusion. My pay In determining whether the 12-month period falls within a longer stay in the foreign country, 12-month periods can overlap one another. My pay Example 1. My pay You are a construction worker who works on and off in a foreign country over a 20-month period. My pay 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. My pay Example 2. My pay You work in New Zealand for a 20-month period from January 1, 2012, through August 31, 2013, except that you spend 28 days in February 2012 and 28 days in February 2013 on vacation in the United States. My pay You are present in New Zealand for at least 330 full days during each of the following two 12-month periods: January 1, 2012 – December 31, 2012 and September 1, 2012 – August 31, 2013. My pay By overlapping the 12-month periods in this way, you meet the physical presence test for the whole 20-month period. My pay See Figure 4-B, on the previous page. My pay Waiver of Time Requirements Both the bona fide residence test and the physical presence test contain minimum time requirements. My pay The minimum time requirements can be waived, however, if you must leave a foreign country because of war, civil unrest, or similar adverse conditions in that country. My pay You must be able to show that you reasonably could have expected to meet the minimum time requirements if not for the adverse conditions. My pay To qualify for the waiver, you must actually have your tax home in the foreign country and be a bona fide resident of, or be physically present in, the foreign country on or before the beginning date of the waiver. My pay Early in 2014, the IRS will publish in the Internal Revenue Bulletin a list of the only countries that qualify for the waiver for 2013 and the effective dates. My pay If you left one of the countries on or after the date listed for each country, you can meet the bona fide residence test or physical presence test for 2013 without meeting the minimum time requirement. My pay However, in figuring your exclusion, the number of your qualifying days of bona fide residence or physical presence includes only days of actual residence or presence within the country. My pay U. My pay S. My pay Travel Restrictions If you are present in a foreign country in violation of U. My pay S. My pay law, you will not be treated as a bona fide resident of a foreign country or as physically present in a foreign country while you are in violation of the law. My pay Income that you earn from sources within such a country for services performed during a period of violation does not qualify as foreign earned income. My pay Your housing expenses within that country (or outside that country for housing your spouse or dependents) while you are in violation of the law cannot be included in figuring your foreign housing amount. My pay For 2013, the only country to which travel restrictions applied was Cuba. My pay The restrictions applied for the entire year. My pay However, individuals working at the U. My pay S. My pay Naval Base at Guantanamo Bay in Cuba are not in violation of U. My pay S. My pay law. My pay Personal service income earned by individuals at the base is eligible for the foreign earned income exclusion provided the other requirements are met. My pay Foreign Earned Income To claim the foreign earned income exclusion, the foreign housing exclusion, or the foreign housing deduction, you must have foreign earned income. My pay Foreign earned income generally is income you receive for services you perform during a period in which you meet both of the following requirements. My pay Your tax home is in a foreign country. My pay You meet either the bona fide residence test or the physical presence test. My pay To determine whether your tax home is in a foreign country, see Tax Home in Foreign Country, earlier. My pay To determine whether you meet either the bona fide residence test or the physical presence test, see Bona Fide Residence Test and Physical Presence Test, earlier. My pay Foreign earned income does not include the following amounts. My pay The value of meals and lodging that you exclude from your income because the meals and lodging were furnished for the convenience of your employer. My pay Pension or annuity payments you receive, including social security benefits (see Pensions and annuities, later). My pay Pay you receive as an employee of the U. My pay S. My pay Government. My pay (See U. My pay S. My pay Government Employees, later. My pay ) Amounts you include in your income because of your employer's contributions to a nonexempt employee trust or to a nonqualified annuity contract. My pay Any unallowable moving expense deduction that you choose to recapture as explained under Moving Expense Attributable to Foreign Earnings in 2 Years in chapter 5. My pay Payments you receive after the end of the tax year following the tax year in which you performed the services that earned the income. My pay Earned income. My pay   This is pay for personal services performed, such as wages, salaries, or professional fees. My pay The list that follows classifies many types of income into three categories. My pay The column headed Variable Income lists income that may fall into either the earned income category, the unearned income category, or partly into both. My pay For more information on earned and unearned income, see Earned and Unearned Income, later. My pay Earned Income Unearned Income Variable Income Salaries and wages Dividends Business profits Commissions Interest Royalties Bonuses Capital gains Rents Professional fees Gambling winnings Scholarships and fellowships Tips Alimony     Social security benefits     Pensions     Annuities     In addition to the types of earned income listed, certain noncash income and allowances or reimbursements are considered earned income. My pay Noncash income. My pay   The fair market value of property or facilities provided to you by your employer in the form of lodging, meals, or use of a car is earned income. My pay Allowances or reimbursements. My pay   Earned income includes allowances or reimbursements you receive, such as the following amounts. My pay    Cost-of-living allowances. My pay Overseas differential. My pay Family allowance. My pay Reimbursement for education or education allowance. My pay Home leave allowance. My pay Quarters allowance. My pay Reimbursement for moving or moving allowance (unless excluded from income as discussed later in Reimbursement of employee expenses under Earned and Unearned Income). My pay Source of Earned Income The source of your earned income is the place where you perform the services for which you received the income. My pay Foreign earned income is income you receive for working in a foreign country. My pay Where or how you are paid has no effect on the source of the income. My pay For example, income you receive for work done in Austria is income from a foreign source even if the income is paid directly to your bank account in the United States and your employer is located in New York City. My pay Example. My pay You are a U. My pay S. My pay citizen, a bona fide resident of Canada, and working as a mining engineer. My pay Your salary is $76,800 per year. My pay You also receive a $6,000 cost-of-living allowance, and a $6,000 education allowance. My pay Your employment contract did not indicate that you were entitled to these allowances only while outside the United States. My pay Your total income is $88,800. My pay You work a 5-day week, Monday through Friday. My pay After subtracting your vacation, you have a total of 240 workdays in the year. My pay You worked in the United States during the year for 6 weeks (30 workdays). My pay The following shows how to figure the part of your income that is for work done in Canada during the year. My pay   Number of days worked in Canada during the year (210) × Total income ($88,800) = $77,700     Number of days of work during the year for which payment was made (240)   Your foreign source earned income is $77,700. My pay Earned and Unearned Income Earned income was defined earlier as pay for personal services performed. My pay Some types of income are not easily identified as earned or unearned income. My pay Some of these types of income are further explained here. My pay Income from a sole proprietorship or partnership. My pay   Income from a business in which capital investment is an important part of producing the income may be unearned income. My pay If you are a sole proprietor or partner and your personal services are also an important part of producing the income, the part of the income that represents the value of your personal services will be treated as earned income. My pay Capital a factor. My pay   If capital investment is an important part of producing income, no more than 30% of your share of the net profits of the business is earned income. My pay   If you have no net profits, the part of your gross profit that represents a reasonable allowance for personal services actually performed is considered earned income. My pay Because you do not have a net profit, the 30% limit does not apply. My pay Example 1. My pay You are a U. My pay S. My pay citizen and meet the bona fide residence test. My pay You invest in a partnership based in Cameroon that is engaged solely in selling merchandise outside the United States. My pay You perform no services for the partnership. My pay At the end of the tax year, your share of the net profits is $80,000. My pay The entire $80,000 is unearned income. My pay Example 2. My pay Assume that in Example 1 you spend time operating the business. My pay Your share of the net profits is $80,000; 30% of your share of the profits is $24,000. My pay If the value of your services for the year is $15,000, your earned income is limited to the value of your services, $15,000. My pay Capital not a factor. My pay   If capital is not an income-producing factor and personal services produce the business income, the 30% rule does not apply. My pay The entire amount of business income is earned income. My pay Example. My pay You and Lou Green are management consultants and operate as equal partners in performing services outside the United States. My pay Because capital is not an income- producing factor, all the income from the partnership is considered earned income. My pay Income from a corporation. My pay   The salary you receive from a corporation is earned income only if it represents a reasonable allowance as compensation for work you do for the corporation. My pay Any amount over what is considered a reasonable salary is unearned income. My pay Example 1. My pay You are a U. My pay S. My pay citizen and an officer and stockholder of a corporation in Honduras. My pay You perform no work or service of any kind for the corporation. My pay During the tax year you receive a $10,000 “salary” from the corporation. My pay The $10,000 clearly is not for personal services and is unearned income. My pay Example 2. My pay You are a U. My pay S. My pay citizen and work full time as secretary-treasurer of your corporation. My pay During the tax year you receive $100,000 as salary from the corporation. My pay If $80,000 is a reasonable allowance as pay for the work you did, then $80,000 is earned income. My pay Stock options. My pay   You may have earned income if you disposed of stock that you got by exercising a stock option granted to you under an employee stock purchase plan. My pay   If your gain on the disposition of stock you got by exercising an option is treated as capital gain, your gain is unearned income. My pay   However, if you disposed of the stock less than 2 years after you were granted the option or less than 1 year after you got the stock, part of the gain on the disposition may be earned income. My pay It is considered received in the year you disposed of the stock and earned in the year you performed the services for which you were granted the option. My pay Any part of the earned income that is due to work you did outside the United States is foreign earned income. My pay   See Publication 525, Taxable and Nontaxable Income, for a discussion of the treatment of stock options. My pay Pensions and annuities. My pay    For purposes of the foreign earned income exclusion, the foreign housing exclusion, and the foreign housing deduction, amounts received as pensions or annuities are unearned income. My pay Royalties. My pay   Royalties from the leasing of oil and mineral lands and patents generally are a form of rent or dividends and are unearned income. My pay   Royalties received by a writer are earned income if they are received: For the transfer of property rights of the writer in the writer's product, or Under a contract to write a book or series of articles. My pay Rental income. My pay   Generally, rental income is unearned income. My pay If you perform personal services in connection with the production of rent, up to 30% of your net rental income can be considered earned income. My pay Example. My pay Larry Smith, a U. My pay S. My pay citizen living in Australia, owns and operates a rooming house in Sydney. My pay If he is operating the rooming house as a business that requires capital and personal services, he can consider up to 30% of net rental income as earned income. My pay On the other hand, if he just owns the rooming house and performs no personal services connected with its operation, except perhaps making minor repairs and collecting rents, none of his net income from the house is considered earned income. My pay It is all unearned income. My pay Professional fees. My pay   If you are engaged in a professional occupation (such as a doctor or lawyer), all fees received in the performance of these services are earned income. My pay Income of an artist. My pay   Income you receive from the sale of paintings you created is earned income. My pay Scholarships and fellowships. My pay   Any portion of a scholarship or fellowship grant that is paid to you for teaching, research or other services is considered earned income if you must include it in your gross income. My pay If the payer of the grant is required to provide you with a Form W-2, Wage and Tax Statement, these amounts will be listed as wages. My pay    Certain scholarship and fellowship income may be exempt under other provisions. My pay See Publication 970, Tax Benefits for Education, chapter 1. My pay Use of employer's property or facilities. My pay   If you receive fringe benefits in the form of the right to use your employer's property or facilities, the fair market value of that right is earned income. My pay Fair market value is the price at which the property would change hands between a willing buyer and a willing seller, neither being required to buy or sell, and both having reasonable knowledge of all the necessary facts. My pay Example. My pay You are privately employed and live in Japan all year. My pay You are paid a salary of $6,000 a month. My pay You live rent-free in a house provided by your employer that has a fair rental value of $3,000 a month. My pay The house is not provided for your employer's convenience. My pay You report on the calendar-year, cash basis. My pay You received $72,000 salary from foreign sources plus $36,000 fair rental value of the house, or a total of $108,000 of earned income. My pay Reimbursement of employee expenses. My pay   If you are reimbursed under an accountable plan (defined below) for expenses you incur on your employer's behalf and you have adequately accounted to your employer for the expenses, do not include the reimbursement for those expenses in your earned income. My pay   The expenses for which you are reimbursed are not considered allocable (related) to your earned income. My pay If expenses and reimbursement are equal, there is nothing to allocate to excluded income. My pay If expenses are more than the reimbursement, the unreimbursed expenses are considered to have been incurred in producing earned income and must be divided between your excluded and included income in determining the amount of unreimbursed expenses you can deduct. My pay (See chapter 5. My pay ) If the reimbursement is more than the expenses, no expenses remain to be divided between excluded and included income and the excess reimbursement must be included in earned income. My pay   These rules do not apply to the following individuals. My pay Straight-commission salespersons. My pay Employees who have arrangements with their employers under which taxes are not withheld on a percentage of the commissions because the employers consider that percentage to be attributable to the employees' expenses. My pay Accountable plan. My pay   An accountable plan is a reimbursement or allowance arrangement that includes all three of the following rules. My pay The expenses covered under the plan must have a business connection. My pay The employee must adequately account to the employer for these expenses within a reasonable period of time. My pay The employee must return any excess reimbursement or allowance within a reasonable period of time. My pay Reimbursement of moving expenses. My pay   Reimbursement of moving expenses may be earned income. My pay You must include as earned income: Any reimbursements of, or payments for, nondeductible moving expenses, Reimbursements that are more than your deductible expenses and that you do not return to your employer, Any reimbursements made (or treated as made) under a nonaccountable plan (any plan that does not meet the rules listed above for an accountable plan), even if they are for deductible expenses, and Any reimbursement of moving expenses you deducted in an earlier year. My pay This section discusses reimbursements that must be included in earned income. My pay Publication 521, Moving Expenses, discusses additional rules that apply to moving expense deductions and reimbursements. My pay   The rules for determining when the reimbursement is considered earned or where the reimbursement is considered earned may differ somewhat from the general rules previously discussed. My pay   Although you receive the reimbursement in one tax year, it may be considered earned for services performed, or to be performed, in another tax year. My pay You must report the reimbursement as income on your return in the year you receive it, even if it is considered earned during a different year. My pay Move from U. My pay S. My pay to foreign country. My pay   If you move from the United States to a foreign country, your moving expense reimbursement is generally considered pay for future services to be performed at the new location. My pay The reimbursement is considered earned solely in the year of the move if you qualify for the exclusion for a period that includes at least 120 days during that tax year. My pay   If you are neither a bona fide resident of nor physically present in a foreign country or countries for a period that includes 120 days during the year of the move, a portion of the reimbursement is considered earned in the year of the move and a portion is considered earned in the year following the year of the move. My pay To figure the amount earned in the year of the move, multiply the reimbursement by a fraction. My pay The numerator (top number) is the number of days in your qualifying period that fall within the year of the move, and the denominator (bottom number) is the total number of days in the year of the move. My pay   The difference between the total reimbursement and the amount considered earned in the year of the move is the amount considered earned in the year following the year of the move. My pay The part earned in each year is figured as shown in the following example. My pay Example. My pay You are a U. My pay S. My pay citizen working in the United States. My pay You were told in October 2012 that you were being transferred to a foreign country. My pay You arrived in the foreign country on December 15, 2012, and you are a bona fide resident for the remainder of 2012 and all of 2013. My pay Your employer reimbursed you $2,000 in January 2013 for the part of the moving expense that you were not allowed to deduct. My pay Because you did not qualify for the exclusion under the bona fide residence test for at least 120 days in 2012 (the year of the move), the reimbursement is considered pay for services performed in the foreign country for both 2012 and 2013. My pay You figure the part of the reimbursement for services performed in the foreign country in 2012 by multiplying the total reimbursement by a fraction. My pay The fraction is the number of days during which you were a bona fide resident in 2012 (the year of the move) divided by 366. My pay The remaining part of the reimbursement is for services performed in the foreign country in 2013. My pay This computation is used only to determine when the reimbursement is considered earned. My pay You would include the amount of the reimbursement in income in 2013, the year you received it. My pay Move between foreign countries. My pay   If you move between foreign countries, any moving expense reimbursement that you must include in income will be considered earned in the year of the move if you qualify for the foreign earned income exclusion for a period that includes at least 120 days in the year of the move. My pay Move to U. My pay S. My pay   If you move to the United States, the moving expense reimbursement that you must include in income is generally considered to be U. My pay S. My pay source income. My pay   However, if under either an agreement between you and your employer or a statement of company policy that is reduced to writing before your move to the foreign country, your employer will reimburse you for your move back to the United States regardless of whether you continue to work for the employer, the includible reimbursement is considered compensation for past services performed in the foreign country. My pay The includible reimbursement is considered earned in the year of the move if you qualify for the foreign earned income exclusion for a period that includes at least 120 days during that year. My pay Otherwise, you treat the includible reimbursement as received for services performed in the foreign country in the year of the move and the year immediately before the year of the move. My pay   See the discussion under Move from U. My pay S. My pay to foreign country , earlier, to figure the amount of the includible reimbursement considered earned in the year of the move. My pay The amount earned in the year before the year of the move is the difference between the total includible reimbursement and the amount earned in the year of the move. My pay Example. My pay You are a U. My pay S. My pay citizen employed in a foreign country. My pay You retired from employment with your employer on March 31, 2013, and returned to the United States after having been a bona fide resident of the foreign country for several years. My pay A written agreement with your employer entered into before you went abroad provided that you would be reimbursed for your move back to the United States. My pay In April 2013, your former employer reimbursed you $4,000 for the part of the cost of your move back to the United States that you were not allowed to deduct. My pay Because you were not a bona fide resident of a foreign country or countries for a period that included at least 120 days in 2013 (the year of the move), the includible reimbursement is considered pay for services performed in the foreign country for both 2013 and 2012. My pay You figure the part of the moving expense reimbursement for services performed in the foreign country for 2013 by multiplying the total includible reimbursement by a fraction. My pay The fraction is the number of days of foreign residence during the year (90) divided by the number of days in the year (365). My pay The remaining part of the includible reimbursement is for services performed in the foreign country in 2012. My pay You report the amount of the includible reimbursement in 2013, the year you received it. My pay    In this example, if you met the physical presence test for a period that included at least 120 days in 2013, the moving expense reimbursement would be considered earned entirely in the year of the move. My pay Storage expense reimbursements. My pay   If you are reimbursed for storage expenses, the reimbursement is for services you perform during the period of time for which the storage expenses are incurred. My pay U. My pay S. My pay Government Employees For purposes of the foreign earned income exclusion, the foreign housing exclusion, and the foreign housing deduction, foreign earned income does not include any amounts paid by the United States or any of its agencies to its employees. My pay This includes amounts paid from both appropriated and nonappropriated funds. My pay The following organizations (and other organizations similarly organized and operated under United States Army, Navy, or Air Force regulations) are integral parts of the Armed Forces, agencies, or instrumentalities of the United States. My pay United States Armed Forces exchanges. My pay Commissioned and noncommissioned officers' messes. My pay Armed Forces motion picture services. My pay Kindergartens on foreign Armed Forces installations. My pay Amounts paid by the United States or its agencies to persons who are not their employees may qualify for exclusion or deduction. My pay If you are a U. My pay S. My pay Government employee paid by a U. My pay S. My pay agency that assigned you to a foreign government to perform specific services for which the agency is reimbursed by the foreign government, your pay is from the U. My pay S. My pay Government and does not qualify for exclusion or deduction. My pay If you have questions about whether you are an employee or an independent contractor, get Publication 15-A, Employer's Supplemental Tax Guide. My pay American Institute in Taiwan. My pay   Amounts paid by the American Institute in Taiwan are not foreign earned income for purposes of the foreign earned income exclusion, the foreign housing exclusion, or the foreign housing deduction. My pay If you are an employee of the American Institute in Taiwan, allowances you receive are exempt from U. My pay S. My pay tax up to the amount that equals tax-exempt allowances received by civilian employees of the U. My pay S. My pay Government. My pay Allowances. My pay   Cost-of-living and foreign-area allowances paid under certain acts of Congress to U. My pay S. My pay civilian officers and employees stationed in Alaska and Hawaii or elsewhere outside the 48 contiguous states and the District of Columbia can be excluded from gross income. My pay Post differentials are wages that must be included in gross income, regardless of the act of Congress under which they are paid. My pay More information. My pay   Publication 516, U. My pay S. My pay Government Civilian Employees Stationed Abroad, has more information for U. My pay S. My pay Government employees abroad. My pay Exclusion of Meals and Lodging You do not include in your income the value of meals and lodging provided to you and your family by your employer at no charge if the following conditions are met. My pay The meals are furnished: On the business premises of your employer, and For the convenience of your employer. My pay The lodging is furnished: On the business premises of your employer, For the convenience of your employer, and As a condition of your employment. My pay If these conditions are met, do not include the value of the meals or lodging in your income, even if a law or your employment contract says that they are provided as compensation. My pay Amounts you do not include in income because of these rules are not foreign earned income. My pay If you receive a Form W-2, excludable amounts should not be included in the total reported in box 1 as wages. My pay Family. My pay   Your family, for this purpose, includes only your spouse and your dependents. My pay Lodging. My pay   The value of lodging includes the cost of heat, electricity, gas, water, sewer service, and similar items needed to make the lodging fit to live in. My pay Business premises of employer. My pay   Generally, the business premises of your employer is wherever you work. My pay For example, if you work as a housekeeper, meals and lodging provided in your employer's home are provided on the business premises of your employer. My pay Similarly, meals provided to cowhands while herding cattle on land leased or owned by their employer are considered provided on the premises of their employer. My pay Convenience of employer. My pay   Whether meals or lodging are provided for your employer's convenience must be determined from all the facts and circumstances. My pay Meals furnished at no charge are considered provided for your employer's convenience if there is a good business reason for providing them, other than to give you more pay. My pay   On the other hand, if your employer provides meals to you or your family as a means of giving you more pay, and there is no other business reason for providing them, their value is extra income to you because they are not furnished for the convenience of your employer. My pay Condition of employment. My pay   Lodging is provided as a condition of employment if you must accept the lodging to properly carry out the duties of your job. My pay You must accept lodging to properly carry out your duties if, for example, you must be available for duty at all times or you could not perform your duties if the lodging was not furnished. My pay Foreign camps. My pay   If the lodging is in a camp located in a foreign country, the camp is considered part of your employer's business premises. My pay The camp must be: Provided for your employer's convenience because the place where you work is in a remote area where satisfactory housing is not available to you on the open market within a reasonable commuting distance, Located as close as reasonably possible in the area where you work, and Provided in a common area or enclave that is not available to the general public for lodging or accommodations and that normally houses at least ten employees. My pay Foreign Earned Income Exclusion If your tax home is in a foreign country and you meet the bona fide residence test or the physical presence test, you can choose to exclude from your income a limited amount of your foreign earned income. My pay Foreign earned income was defined earlier in this chapter. My pay You also can choose to exclude from your income a foreign housing amount. My pay This is explained later under Foreign Housing Exclusion. My pay If you choose to exclude a foreign housing amount, you must figure the foreign housing exclusion before you figure the foreign earned income exclusion. My pay Your foreign earned income exclusion is limited to your foreign earned income minus your foreign housing exclusion. My pay If you choose to exclude foreign earned income, you cannot deduct, exclude, or claim a credit for any item that can be allocated to or charged against the excluded amounts. My pay This includes any expenses, losses, and other normally deductible items allocable to the excluded income. My pay For more information about deductions and credits, see chapter 5 . My pay Limit on Excludable Amount You may be able to exclude up to $97,600 of your foreign earned income in 2013. My pay You cannot exclude more than the smaller of: $97,600, or Your foreign earned income (discussed earlier) for the tax year minus your foreign housing exclusion (discussed later). My pay If both you and your spouse work abroad and each of you meets either the bona fide residence test or the physical presence test, you can each choose the foreign earned income exclusion. My pay You do not both need to meet the same test. My pay Together, you and your spouse can exclude as much as $195,200. My pay Paid in year following work. My pay   Generally, you are considered to have earned income in the year in which you do the work for which you receive the income, even if you work in one year but are not paid until the following year. My pay If you report your income on a cash basis, you report the income on your return for the year you receive it. My pay If you work one year, but are not paid for that work until the next year, the amount you can exclude in the year you are paid is the amount you could have excluded in the year you did the work if you had been paid in that year. My pay For an exception to this general rule, see Year-end payroll period, later. My pay Example. My pay You were a bona fide resident of Brazil for all of 2012 and 2013. My pay You report your income on the cash basis. My pay In 2012, you were paid $84,200 for work you did in Brazil during that year. My pay You excluded all of the $84,200 from your income in 2012. My pay In 2013, you were paid $117,300 for your work in Brazil. My pay $18,800 was for work you did in 2012 and $98,500 was for work you did in 2013. My pay You can exclude $10,900 of the $18,800 from your income in 2013. My pay This is the $95,100 maximum exclusion in 2012 minus the $84,200 actually excluded that year. My pay You must include the remaining $7,900 in income in 2013 because you could not have excluded that income in 2012 if you had received it that year. My pay You can exclude $97,600 of the $98,500 you were paid for work you did in 2013 from your 2013 income. My pay Your total foreign earned income exclusion for 2013 is $108,500 ($10,900 for work you did in 2012 and $97,600 for work you did in 2013). My pay You would include in your 2013 income $8,800 ($7,900 for the work you did in 2012 and $900 for the work you did in 2013). My pay Year-end payroll period. My pay   There is an exception to the general rule that income is considered earned in the year you do the work for which you receive the income. My pay If you are a cash-basis taxpayer, any salary or wage payment you receive after the end of the year in which you do the work for which you receive the pay is considered earned entirely in the year you receive it if all four of the following apply. My pay The period for which the payment is made is a normal payroll period of your employer that regularly applies to you. My pay The payroll period includes the last day of your tax year (December 31 if you figure your taxes on a calendar-year basis). My pay The payroll period is not longer than 16 days. My pay The payday comes at the same time in relation to the payroll period that it would normally come and it comes before the end of the next payroll period. My pay Example. My pay You are paid twice a month. My pay For the normal payroll period that begins on the first of the month and ends on the fifteenth of the month, you are paid on the sixteenth day of the month. My pay For the normal payroll period that begins on the sixteenth of the month and ends on the last day of the month, you are paid on the first day of the following month. My pay Because all of the above conditions are met, the pay you received on January 1, 2013, is considered earned in 2013. My pay Income earned over more than 1 year. My pay   Regardless of when you actually receive income, you must apply it to the year in which you earned it in figuring your excludable amount for that year. My pay For example, a bonus may be based on work you did over several years. My pay You determine the amount of the bonus that is considered earned in a particular year in two steps. My pay Divide the bonus by the number of calendar months in the period when you did the work that resulted in the bonus. My pay Multiply the result of (1) by the number of months you did the work during the year. My pay This is the amount that is subject to the exclusion limit for that tax year. My pay Income received more than 1 year after it was earned. My pay   You cannot exclude income you receive after the end of the year following the year you do the work to earn it. My pay Example. My pay   You were a bona fide resident of Sweden for 2011, 2012, and 2013. My pay You report your income on the cash basis. My pay In 2011, you were paid $69,000 for work you did in Sweden that year and in 2012 you were paid $74,000 for that year's work in Sweden. My pay You excluded all the income on your 2011 and 2012 returns. My pay   In 2013, you were paid $92,000; $82,000 for your work in Sweden during 2013, and $10,000 for work you did in Sweden in 2011. My pay You cannot exclude any of the $10,000 for work done in 2011 because you received it after the end of the year following the year in which you earned it. My pay You must include the $10,000 in income. My pay You can exclude all of the $82,000 received for work you did in 2013. My pay Community income. My pay   The maximum exclusion applies separately to the earnings of spouses. My pay Ignore any community property laws when you figure your limit on the foreign earned income exclusion. My pay Part-year exclusion. My pay   If the period for which you qualify for the foreign earned income exclusion includes only part of the year, you must adjust the maximum limit based on the number of qualifying days in the year. My pay The number of qualifying days is the number of days in the year within the period on which you both: Have your tax home in a foreign country, and Meet either the bona fide residence test or the physical presence test. My pay   For this purpose, you can count as qualifying days all days within a period of 12 consecutive months once you are physically present and have your tax home in a foreign country for 330 full days. My pay To figure your maximum exclusion, multiply the maximum excludable amount for the year by the number of your qualifying days in the year, and then divide the result by the number of days in the year. My pay Example. My pay You report your income on the calendar-year basis and you qualified for the foreign earned income exclusion under the bona fide residence test for 75 days in 2013. My pay You can exclude a maximum of 75/365 of $97,600, or $20,055, of your foreign earned income for 2013. My pay If you qualify under the bona fide residence test for all of 2014, you can exclude your foreign earned income up to the 2014 limit. My pay Physical presence test. My pay   Under the physical presence test, a 12-month period can be any period of 12 consecutive months that includes 330 full days. My pay If you qualify for the foreign earned income exclusion under the physical presence test for part of a year, it is important to carefully choose the 12-month period that will allow the maximum exclusion for that year. My pay Example. My pay You are physically present and have your tax home in a foreign country for a 16-month period from June 1, 2012, through September 30, 2013, except for 16 days in December 2012 when you were on vacation in the United States. My pay You figure the maximum exclusion for 2012 as follows. My pay Beginning with June 1, 2012, count forward 330 full days. My pay Do not count the 16 days you spent in the United States. My pay The 330th day, May 12, 2013, is the last day of a 12-month period. My pay Count backward 12 months from May 11, 2013, to find the first day of this 12-month period, May 12, 2012. My pay This 12-month period runs from May 12, 2012, through May 11, 2013. My pay Count the total days during 2012 that fall within this 12-month period. My pay This is 234 days (May 12, 2012 – December 31, 2012). My pay Multiply $95,100 (the maximum exclusion for 2012) by the fraction 234/366 to find your maximum exclusion for 2012 ($60,802). My pay You figure the maximum exclusion for 2013 in the opposite manner. My pay Beginning with your last full day, September 30, 2013, count backward 330 full days. My pay Do not count the 16 days you spent in the United States. My pay That day, October 20, 2012, is the first day of a 12-month period. My pay Count forward 12 months from October 20, 2012, to find the last day of this 12-month period, October 19, 2013. My pay This 12-month period runs from October 20, 2012, through October 19, 2013. My pay Count the total days during 2013 that fall within this 12-month period. My pay This is 292 days (January 1, 2013 – October 19, 2013). My pay Multiply $97,600, the maximum limit, by the fraction 292/365 to find your maximum exclusion for 2013 ($78,080). My pay Choosing the Exclusion The foreign earned income exclusion is voluntary. My pay You can choose the exclusion by completing the appropriate parts of Form 2555. My pay When You Can Choose the Exclusion Your initial choice of the exclusion on Form 2555 or Form 2555-EZ generally must be made with one of the following returns. My pay A return filed by the due date (including any extensions). My pay A return amending a timely-filed return. My pay Amended returns generally must be filed by the later of 3 years after the filing date of the original return or 2 years after the tax is paid. My pay A return filed within 1 year from the original due date of the return (determined without regard to any extensions). My pay Filing after the above periods. My pay   You can choose the exclusion on a return filed after the periods described above if you owe no federal income tax after taking into account the exclusion. My pay If you owe federal income tax after taking into account the exclusion, you can choose the exclusion on a return filed after the periods described earlier if you file before the IRS discovers that you failed to choose the exclusion. My pay Whether or not you owe federal income tax after taking the exclusion into account, if you file your return after the periods described earlier, you must type or legibly print at the top of the first page of the Form 1040 “Filed pursuant to section 1. My pay 911-7(a)(2)(i)(D). My pay ” If you owe federal income tax after taking into account the foreign earned income exclusion and the IRS discovered that you failed to choose the exclusion, you may still be able to choose the exclusion. My pay You must request a private letter ruling under Income Tax Regulation 301. My pay 9100-3 and Revenue Procedure 2013-1, 2013-1 I. My pay R. My pay B. My pay 1, available at www. My pay irs. My pay gov/irb/2013-01_IRB/ar06. My pay html. My pay Effect of Choosing the Exclusion Once you choose to exclude your foreign earned income, that choice remains in effect for that year and all later years unless you revoke it. My pay Foreign tax credit or deduction. My pay  
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The My Pay

My pay 1. My pay   Bona Fide Residence Table of Contents Presence TestDays of Presence in the United States or Relevant Possession Significant Connection Tax HomeExceptions Closer ConnectionException for Year of Move Special Rules in the Year of a MoveYear of Moving to a Possession Year of Moving From a Possession Reporting a Change in Bona Fide ResidenceWho Must File Penalty for Not Filing Form 8898 In order to qualify for certain tax benefits (see chapter 3), you must be a bona fide resident of American Samoa, the CNMI, Guam, Puerto Rico, or the USVI for the entire tax year. My pay Generally, you are a bona fide resident of one of these possessions (the relevant possession) if, during the tax year, you: Meet the presence test, Do not have a tax home outside the relevant possession, and Do not have a closer connection to the United States or to a foreign country than to the relevant possession. My pay Special rule for members of the U. My pay S. My pay Armed Forces. My pay   If you are a member of the U. My pay S. My pay Armed Forces who qualified as a bona fide resident of the relevant possession in an earlier tax year, your absence from that possession during the current tax year in compliance with military orders will not affect your status as a bona fide resident. My pay Likewise, being in a possession solely in compliance with military orders will not qualify you for bona fide residency. My pay Also see the special income source rule for members of the U. My pay S. My pay Armed Forces in chapter 2, under Compensation for Labor or Personal Services . My pay Special rule for civilian spouse of active duty member of the U. My pay S. My pay Armed Forces. My pay   If you are the civilian spouse of an active duty servicemember, under Military Spouses Residency Relief Act (MSRRA) you can choose to keep your prior residence or domicile for tax purposes (tax residence) when accompanying the servicemember spouse, who is relocating under military orders, to a new military duty station in one of the 50 states, the District of Columbia, or a U. My pay S. My pay possession. My pay Before relocating, you and your spouse must have the same tax residence. My pay If you are a civilian spouse and choose to keep your prior tax residence after such relocation, the source of income for services performed (for example, wages, salaries, tips, or self-employment) by you is considered to be (the jurisdiction of) the prior tax residence. My pay As a result, the amount of income tax withholding (from Form(s) W-2, Wage and Tax Statement) that you are able to claim on your federal return, as well as the need to file a state or U. My pay S. My pay possession return, may be affected. My pay For more information, consult with state, local, or U. My pay S. My pay possession tax authorities regarding your tax obligations under MSRRA. My pay Presence Test If you are a U. My pay S. My pay citizen or resident alien, you will satisfy the presence test for the entire tax year if you meet one of the following conditions. My pay You were present in the relevant possession for at least 183 days during the tax year. My pay You were present in the relevant possession for at least 549 days during the 3-year period that includes the current tax year and the 2 immediately preceding tax years. My pay During each year of the 3-year period, you must be present in the relevant possession for at least 60 days. My pay You were present in the United States for no more than 90 days during the tax year. My pay You had earned income in the United States of no more than a total of $3,000 and were present for more days in the relevant possession than in the United States during the tax year. My pay Earned income is pay for personal services performed, such as wages, salaries, or professional fees. My pay You had no significant connection to the United States during the tax year. My pay Special rule for nonresident aliens. My pay   Conditions (1) through (5) above do not apply to nonresident aliens of the United States. My pay Instead, nonresident aliens must meet the substantial presence test discussed in chapter 1 of Publication 519. My pay In that discussion, substitute the name of the possession for “United States” and “U. My pay S. My pay ” wherever they appear. My pay Disregard the discussion in that chapter about a Closer Connection to a Foreign Country. My pay Days of Presence in the United States or Relevant Possession Generally, you are treated as being present in the United States or in the relevant possession on any day that you are physically present in that location at any time during the day. My pay Days of presence in a possession. My pay   You are considered to be present in the relevant possession on any of the following days. My pay Any day you are physically present in that possession at any time during the day. My pay Any day you are outside of the relevant possession in order to receive, or to accompany any of the following family members to receive, qualifying medical treatment (see Qualifying Medical Treatment , later). My pay Your parent. My pay Your spouse. My pay Your child, who is your son, daughter, stepson, or stepdaughter. My pay This includes an adopted child or child lawfully placed with you for legal adoption. My pay This also includes a foster child who is placed with you by an authorized placement agency or by judgment, decree, or other order of any court of competent jurisdiction. My pay Any day you are outside the relevant possession because you leave or are unable to return to the relevant possession during any: 14-day period within which a major disaster occurs in the relevant possession for which a Federal Emergency Management Agency (FEMA) notice of a federal declaration of a major disaster is issued in the Federal Register, or Period for which a mandatory evacuation order is in effect for the geographic area in the relevant possession in which your main home is located. My pay   If, during a single day, you are physically present: In the United States and in the relevant possession, that day is considered a day of presence in the relevant possession; or In two possessions, that day is considered a day of presence in the possession where your tax home is located (see Tax Home , later). My pay Days of presence in the United States. My pay   You are considered to be present in the United States on any day that you are physically present in the United States at any time during the day. My pay However, do not count the following days as days of presence in the United States. My pay Any day you are temporarily present in the United States in order to receive, or to accompany a parent, spouse, or child who is receiving, qualifying medical treatment. My pay “Child” is defined under item 2c earlier. My pay “Qualifying medical treatment” is defined later. My pay Any day you are temporarily present in the United States because you leave or are unable to return to the relevant possession during any: 14-day period within which a major disaster occurs in the relevant possession for which a Federal Emergency Management Agency (FEMA) notice of a federal declaration of a major disaster is issued in the Federal Register, or Period for which a mandatory evacuation order is in effect for the geographic area in the relevant possession in which your main home is located. My pay Any day you are in the United States for less than 24 hours when you are traveling between two places outside the United States. My pay Any day you are temporarily present in the United States as a professional athlete to compete in a charitable sports event (defined later). My pay Any day you are temporarily in the United States as a student (defined later). My pay Any day you are in the United States serving as an elected representative of the relevant possession, or serving full time as an elected or appointed official or employee of the government of that possession (or any of its political subdivisions). My pay Qualifying Medical Treatment Such treatment is generally provided by (or under the supervision of) a physician for an illness, injury, impairment, or physical or mental condition. My pay The treatment generally involves: Any period of inpatient care that requires an overnight stay in a hospital or hospice, and any period immediately before or after that inpatient care to the extent it is medically necessary, or Any temporary period of inpatient care in a residential medical care facility for medically necessary rehabilitation services. My pay With respect to each qualifying medical treatment, you must prepare (or obtain) and maintain documentation supporting your claim that such treatment meets the criteria to be considered days of presence in the relevant possession. My pay You must be able to produce this documentation within 30 days if requested by the IRS or tax administrator for the relevant possession. My pay You must keep the following documentation. My pay Records that provide: The patient's name and relationship to you (if the medical treatment is provided to a person you accompany); The name and address of the hospital, hospice, or residential medical care facility where the medical treatment was provided; The name, address, and telephone number of the physician who provided the medical treatment; The date(s) on which the medical treatment was provided; and Receipt(s) of payment for the medical treatment. My pay Signed certification by the providing or supervising physician that the medical treatment met the requirements for being qualified medical treatment, and setting forth: The patient's name, A reasonably detailed description of the medical treatment provided by (or under the supervision of) the physician, The dates on which the medical treatment was provided, and The medical facts that support the physician's certification and determination that the treatment was medically necessary. My pay Charitable Sports Event A charitable sports event is one that meets all of the following conditions. My pay The main purpose is to benefit a qualified charitable organization. My pay The entire net proceeds go to charity. My pay Volunteers perform substantially all the work. My pay In figuring the days of presence in the United States, you can exclude only the days on which you actually competed in the charitable sports event. My pay You cannot exclude the days on which you were in the United States to practice for the event, to perform promotional or other activities related to the event, or to travel between events. My pay Student To qualify as a student, you must be, during some part of each of any 5 calendar months during the calendar year: A full-time student at a school that has a regular teaching staff, course of study, and regularly enrolled body of students in attendance, or A student taking a full-time, on-farm training course given by a school described in (1) above or by a state, county, or local government agency. My pay The 5 calendar months do not have to be consecutive. My pay Full-time student. My pay   A full-time student is a person who is enrolled for the number of hours or courses the school considers to be full-time attendance. My pay However, school attendance exclusively at night is not considered full-time attendance. My pay School. My pay   The term “school” includes elementary schools, middle schools, junior and senior high schools, colleges, universities, and technical, trade, and mechanical schools. My pay It does not include on-the-job training courses, correspondence schools, and schools offering courses only through the Internet. My pay Significant Connection One way in which you can meet the presence test is to have no significant connection to the United States during the tax year. My pay This section looks at the factors that determine if a significant connection exists. My pay You are treated as having a significant connection to the United States if you: Have a permanent home in the United States, Are currently registered to vote in any political subdivision of the United States, or Have a spouse or child (see item 2c under Days of presence in a possession , earlier) who is under age 18 whose main home is in the United States, other than: A child who is in the United States because he or she is the child of divorced or legally separated parents and is living with a custodial parent under a custodial decree or multiple support agreement, or A child who is in the United States as a student. My pay For the purpose of determining if you have a significant connection to the United States, the term “spouse” does not include a spouse from whom you are legally separated under a decree of divorce or separate maintenance. My pay Permanent home. My pay   A permanent home generally includes an accommodation such as a house, an apartment, or a furnished room that is either owned or rented by you or your spouse. My pay The dwelling unit must be available at all times, continuously, not only for short stays. My pay Exception for rental property. My pay   If you or your spouse own the dwelling unit and at any time during the tax year it is rented to someone else at fair rental value, it will be considered your permanent home only if you or your spouse use that property for personal purposes for more than the greater of: 14 days, or 10% of the number of days during that tax year that the property is rented to others at a fair rental value. My pay   You are treated as using rental property for personal purposes on any day the property is not being rented to someone else at fair rental value for the entire day. My pay   A day of personal use of a dwelling unit is also any day that the unit is used by any of the following persons. My pay You or any other person who has an interest in it, unless you rent it to another owner as his or her main home under a shared equity financing agreement. My pay A member of your family or a member of the family of any other person who has an interest in it, unless the family member uses the dwelling unit as his or her main home and pays a fair rental price. My pay Family includes only brothers and sisters, half-brothers and half-sisters, spouses, ancestors (parents, grandparents, etc. My pay ), and lineal descendants (children, grandchildren, etc. My pay ). My pay Anyone under an arrangement that lets you use some other dwelling unit. My pay Anyone at less than a fair rental price. My pay   However, any day you spend working substantially full time repairing and maintaining (not improving) your property is not counted as a day of personal use. My pay Whether your property is used mainly for this purpose is determined in light of all the facts and circumstances, such as: The amount of time you devote to repair and maintenance work, How often during the tax year you perform repair and maintenance work on this property, and The presence and activities of companions. My pay   See Publication 527, Residential Rental Property, for more information about personal use of a dwelling unit. My pay Example—significant connection. My pay Ann Green, a U. My pay S. My pay citizen, is a sales representative for a company based in Guam. My pay Ann lives with her spouse and young children in their house in Guam, where she is also registered to vote. My pay Her business travel requires her to spend 120 days in the United States and another 120 days in foreign countries. My pay When traveling on business, Ann generally stays at hotels but sometimes stays with her brother, who lives in the United States. My pay Ann's stays are always of short duration and she asks her brother's permission to stay with him. My pay Her brother's house is not her permanent home, nor does she have any other accommodations in the United States that would be considered her permanent home. My pay Ann satisfies the presence test because she has no significant connection to the United States. My pay Example—presence test. My pay Eric and Wanda Brown live for part of the year in a condominium, which they own, in the CNMI. My pay They also own a house in Maine where they live for 120 days every year to be near their grown children and grandchildren. My pay The Browns are retired and their only income is from pension payments, dividends, interest, and social security benefits. My pay In 2013, they spent only 175 days in the CNMI because of a 70-day vacation to Europe and Asia. My pay Thus, in 2013, the Browns were not present in the CNMI for at least 183 days, were present in the United States for more than 90 days, and had a significant connection to the United States because of their permanent home. My pay However, the Browns still satisfied the presence test with respect to the CNMI because they had no earned income in the United States and were physically present for more days in the CNMI than in the United States. My pay Tax Home You will have met the tax home test if you did not have a tax home outside the relevant possession during any part of the tax year. My pay Your tax home is your regular or main place of business, employment, or post of duty regardless of where you maintain your family home. My pay If you do not have a regular or main place of business because of the nature of your work, then your tax home is the place where you regularly live. My pay If you do not fit either of these categories, you are considered an itinerant and your tax home is wherever you work. My pay Exceptions There are some special rules regarding tax home that provide exceptions to the general rule stated above. My pay Students and Government Officials Disregard the following days when determining whether you have a tax home outside the relevant possession. My pay Days you were temporarily in the United States as a student (see Student under Days of Presence in the United States or Relevant Possession, earlier). My pay Days you were in the United States serving as an elected representative of the relevant possession, or serving full time as an elected or appointed official or employee of the government of that possession (or any of its political subdivisions). My pay Seafarers You will not be considered to have a tax home outside the relevant possession solely because you are employed on a ship or other seafaring vessel that is predominantly used in local and international waters. My pay For this purpose, a vessel is considered to be predominantly used in local and international waters if, during the tax year, the total amount of time it is used in international waters and in the waters within 3 miles of the relevant possession exceeds the total amount of time it is used in the territorial waters of the United States, another possession, or any foreign country. My pay Example. My pay In 2013, Sean Silverman, a U. My pay S. My pay citizen, was employed by a fishery and spent 250 days at sea on a fishing vessel. My pay When not at sea, Sean lived with his spouse at a house they own in American Samoa. My pay The fishing vessel on which Sean works departs and arrives at various ports in American Samoa, other possessions, and foreign countries, but was in international or American Samoa's local waters for 225 days. My pay For purposes of determining bona fide residency of American Samoa, Sean will not be considered to have a tax home outside that possession solely because of his employment on board the fishing vessel. My pay Year of Move If you are moving to or from a possession during the year, you may still be able to meet the tax home test for that year. My pay See Special Rules in the Year of a Move , later in this chapter. My pay Closer Connection You will have met the closer connection test if, during any part of the tax year, you do not have a closer connection to the United States or a foreign country than to the relevant U. My pay S. My pay possession. My pay You will be considered to have a closer connection to a possession than to the United States or to a foreign country if you have maintained more significant contacts with the possession(s) than with the United States or foreign country. My pay In determining if you have maintained more significant contacts with the relevant possession, the facts and circumstances to be considered include, but are not limited to, the following. My pay The location of your permanent home. My pay The location of your family. My pay The location of personal belongings, such as automobiles, furniture, clothing, and jewelry owned by you and your family. My pay The location of social, political, cultural, professional, or religious organizations with which you have a current relationship. My pay The location where you conduct your routine personal banking activities. My pay The location where you conduct business activities (other than those that go into determining your tax home). My pay The location of the jurisdiction in which you hold a driver's license. My pay The location of the jurisdiction in which you vote. My pay The location of charitable organizations to which you contribute. My pay The country of residence you designate on forms and documents. My pay The types of official forms and documents you file, such as Form W-8BEN, Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting (Individuals), or Form W-9, Request for Taxpayer Identification Number and Certification. My pay Your connections to the relevant possession will be compared to the total of your connections with the United States and foreign countries. My pay Your answers to the questions on Form 8898, Part III, will help establish the jurisdiction to which you have a closer connection. My pay Example—closer connection to the United States. My pay Marcos Reyes, a U. My pay S. My pay citizen, moved to Puerto Rico in 2013 to start an investment consulting and venture capital business. My pay His spouse and two teenage children remained in California to allow the children to complete high school. My pay He traveled back to the United States regularly to see his spouse and children, to engage in business activities, and to take vacations. My pay Marcos had an apartment available for his full-time use in Puerto Rico, but remained a joint owner of the residence in California where his spouse and children lived. My pay Marcos and his family had automobiles and personal belongings such as furniture, clothing, and jewelry located at both residences. My pay Although Marcos was a member of the Puerto Rico Chamber of Commerce, he also belonged to and had current relationships with social, political, cultural, and religious organizations in California. My pay Marcos received mail in California, including bank and brokerage statements and credit card bills. My pay He conducted his personal banking activities in California. My pay He held a California driver's license and was also registered to vote there. My pay Based on all of the particular facts and circumstances pertaining to Marcos, he was not a bona fide resident of Puerto Rico in 2013 because he had a closer connection to the United States than to Puerto Rico. My pay Closer connection to another possession. My pay   Generally, possessions are not treated as foreign countries. My pay Therefore, a closer connection to a possession other than the relevant possession will not be treated as a closer connection to a foreign country. My pay Example—tax home and closer connection to possession. My pay Pearl Blackmon, a U. My pay S. My pay citizen, is a permanent employee of a hotel in Guam, but works only during the tourist season. My pay For the remainder of each year, Pearl lives with her spouse and children in the CNMI, where she has no outside employment. My pay Most of Pearl's personal belongings, including her automobile, are located in the CNMI. My pay She is registered to vote in, and has a driver's license issued by, the CNMI. My pay She does her personal banking in the CNMI and routinely lists her CNMI address as her permanent address on forms and documents. My pay Pearl satisfies the presence test with respect to both Guam and the CNMI. My pay She satisfies the tax home test with respect to Guam, because her regular place of business is in Guam. My pay Pearl satisfies the closer connection test with respect to both Guam and the CNMI, because she does not have a closer connection to the United States or to any foreign country. My pay Pearl is considered a bona fide resident of Guam, the location of her tax home. My pay Exception for Year of Move If you are moving to or from a possession during the year, you may still be able to meet the closer connection test for that year. My pay See Special Rules in the Year of a Move , next. My pay Special Rules in the Year of a Move If you are moving to or from a possession during the year, you may still be able to meet the tax home and closer connection tests for that year. My pay Year of Moving to a Possession You will satisfy the tax home and closer connection tests in the tax year of changing your residence to the relevant possession if you meet all of the following. My pay You have not been a bona fide resident of the relevant possession in any of the 3 tax years immediately preceding your move. My pay In the year of the move, you do not have a tax home outside the relevant possession or a closer connection to the United States or a foreign country than to the relevant possession during any of the last 183 days of the tax year. My pay You are a bona fide resident of the relevant possession for each of the 3 tax years immediately following your move. My pay Example. My pay Dwight Wood, a U. My pay S. My pay citizen, files returns on a calendar year basis. My pay He lived in the United States from January 2007 through May 2013. My pay In June 2013 he moved to the USVI, purchased a house, and accepted a permanent job with a local employer. My pay From July 1 through December 31, 2013 (more than 183 days), Dwight's principal place of business was in the USVI and, during that time, he did not have a closer connection to the United States or a foreign country than to the USVI. My pay If he is a bona fide resident of the USVI during all of 2014 through 2016, he will satisfy the tax home and closer connection tests for 2013. My pay If Dwight also satisfies the presence test in 2013, he will be considered a bona fide resident of the USVI for the entire 2013 tax year. My pay Year of Moving From a Possession In the year you cease to be a bona fide resident of American Samoa, the CNMI, Guam, or the USVI, you will satisfy the tax home and closer connection tests with respect to the relevant possession if you meet all of the following. My pay You have been a bona fide resident of the relevant possession for each of the 3 tax years immediately preceding your change of residence. My pay In the year of the move, you do not have a tax home outside the relevant possession or a closer connection to the United States or a foreign country than to the relevant possession during any of the first 183 days of the tax year. My pay You are not a bona fide resident of the relevant possession for any of the 3 tax years immediately following your move. My pay Example. My pay Jean Aspen, a U. My pay S. My pay citizen, files returns on a calendar year basis. My pay From January 2010 through December 2012, Jean was a bona fide resident of American Samoa. My pay Jean continued to live there until September 6, 2013, when she accepted new employment and moved to Hawaii. My pay Jean's principal place of business from January 1 through September 5, 2013 (more than 183 days), was in American Samoa, and during that period Jean did not have a closer connection to the United States or a foreign country than to American Samoa. My pay If Jean continues to live and work in Hawaii for the rest of 2013 and throughout years 2014 through 2016, she will satisfy the tax home and closer connection tests for 2013 with respect to American Samoa. My pay If Jean also satisfies the presence test in 2013, she will be considered a bona fide resident for the entire 2013 tax year. My pay Puerto Rico You will be considered a bona fide resident of Puerto Rico for the part of the tax year preceding the date on which you move if you: Are a U. My pay S. My pay citizen, Are a bona fide resident of Puerto Rico for at least 2 tax years immediately preceding the tax year of the move, Cease to be a bona fide resident of Puerto Rico during the tax year, Cease to have a tax home in Puerto Rico during the tax year, and Have a closer connection to Puerto Rico than to the United States or a foreign country throughout the part of the tax year preceding the date on which you cease to have a tax home in Puerto Rico. My pay Example. My pay Randy White, a U. My pay S. My pay citizen, files returns on a calendar year basis. My pay For all of 2011 and 2012, Randy was a bona fide resident of Puerto Rico. My pay From January through April 2013, Randy continued to reside and maintain his principal place of business in and closer connection to Puerto Rico. My pay On May 5, 2013, Randy moved and changed his tax home to Nevada. My pay Later that year he established a closer connection to the United States than to Puerto Rico. My pay Randy did not satisfy the presence test for 2013 with respect to Puerto Rico, nor the tax home or closer connection tests. My pay However, because Randy was a bona fide resident of Puerto Rico for at least 2 tax years before he moved to Nevada in 2013, he was a bona fide resident of Puerto Rico from January 1 through May 4, 2013. My pay Reporting a Change in Bona Fide Residence If you became or ceased to be a bona fide resident of a U. My pay S. My pay possession, you may need to file Form 8898. My pay This applies to the U. My pay S. My pay possessions of American Samoa, the CNMI, Guam, Puerto Rico, and the USVI. My pay Who Must File You must file Form 8898 for the tax year in which you meet both of the following conditions. My pay Your worldwide gross income (defined below) in that tax year is more than $75,000. My pay You meet one of the following. My pay You take a position for U. My pay S. My pay tax purposes that you became a bona fide resident of a U. My pay S. My pay possession after a tax year for which you filed a U. My pay S. My pay income tax return as a citizen or resident alien of the United States but not as a bona fide resident of the possession. My pay You are a citizen or resident alien of the United States who takes the position for U. My pay S. My pay tax purposes that you ceased to be a bona fide resident of a U. My pay S. My pay possession after a tax year for which you filed an income tax return (with the IRS, the possession tax authority, or both) as a bona fide resident of the possession. My pay You take the position for U. My pay S. My pay tax purposes that you became a bona fide resident of Puerto Rico or American Samoa after a tax year for which you were required to file an income tax return as a bona fide resident of the CNMI, Guam, or the USVI. My pay Worldwide gross income. My pay   Worldwide gross income means all income you received in the form of money, goods, property, and services, including any income from sources outside the United States (even if you can exclude part or all of it) and before any deductions, credits, or rebates. My pay Example. My pay You are a U. My pay S. My pay citizen who moved to the CNMI in December 2012, but did not become a bona fide resident of that possession until the 2013 tax year. My pay You must file Form 8898 for the 2013 tax year if your worldwide gross income for that year was more than $75,000. My pay Penalty for Not Filing Form 8898 If you are required to file Form 8898 for any tax year and you fail to file it, you may owe a penalty of $1,000. My pay You may also owe this penalty if you do not include all the information required by the form or the form includes incorrect information. My pay In either case, you will not owe this penalty if you can show that such failure is due to reasonable cause and not willful neglect. My pay This is in addition to any criminal penalty that may be imposed. My pay Prev  Up  Next   Home   More Online Publications