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Bona Fide Resident Test, Form 2555

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What is a Bona Fide Resident 

The Bona Fide Resident Test is one of the two tests US Americans and green card holders living abroad can use to qualify to claim the Foreign Earned Income Exclusion, the Foreign Housing Exclusion, or the Foreign Housing Deduction. If your tax home is in a foreign country, the Physical Presence Test or the Bona Fide Resident Test can be used by an expat living overseas to maximize the exclusion of their foreign earned income and avoid double taxation.

The requirements to meet the bona fide residence test

To meet the bona fide resident test

  1. You must be bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax year. This means for most taxpayers January 1 – December 31 and
  2. You must be either:

·        A U.S. citizen, or

·        A U.S. resident alien who is a citizen or national of a country with which the United States has an income tax treaty in effect.

A bona fide resident

You are not automatically a bona fide resident by simply living in a foreign country or countries for a full tax year. To be a bona fide resident you must:

  1. Establish a residence in a foreign country and
  2. Reside in a foreign country or countries for an uninterrupted period that includes an entire tax year and
  3. You cannot make a statement to the authorities of that foreign country that you are in 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

The bona fide resident test is determined on a case by case basis based on questions you answer on the IRS Form 2555 or 2555-EZ. Factors taken into account as to whether you qualify as a bona fide resident are the nature and length and also your intention or purpose of your stay abroad. If you are overseas and work for an indefinite or long period of time and set up a permanent residence for you and your family you will likely qualify. However, if you go overseas for a defined period of time to work on a project, you will likely not qualify.

If you leave the country for short periods of time for business or pleasure, as long as you intend to return, you can still be considered a bona fide resident if you meet the test above.

Bona Fide Resident for Part of a Year

Once you have established bona fide residence in a foreign country for an uninterrupted period that includes an entire tax year, you will qualify as a bona fide resident for the period starting with the date you actually began the residence and ending with the date you abandon the foreign residence. You could qualify as a bona fide resident for an entire tax year plus parts of 1 or 2 other tax years.

BREAKING DOWN 'Bona Fide Foreign Resident'

Bona Fide Foreign Residence status is not automatically accorded merely by living in a foreign country for one year. A clearly-defined permanent residence must be established in the foreign country before this status can be accorded. However, the taxpayer's domicile, or permanent home must be in the U.S., to which the taxpayer eventually intends to return.