330 Days Overseas or Bonafide Residency Still Required with 2018 Tax Law Change
As many of you are aware, the IRS announced that certain U.S. citizens or resident aliens working as contractors in designated combat zones may now qualify for the foreign earned income exclusion. However, the wording of the headline in their announcement has produced significant confusion. It is critically important that you understand that one must still have at least 330 days overseas or be a bonafide resident to qualify to claim the exclusion.
The sole purpose of the new law was to remove the ambiguity regarding having an “abode” in the US while meeting the 330 days overseas or bonafide residency test for those working in combat zones. Prior to this change, having an abode in the US precluded one from confidently making the claim because of the IRS’ faulty interpretation of “abode”. This change eliminated the IRS’ ability to deny a legitimate claim to the exclusion.
As in the past, the foreign earned income exclusion is not available to federal employees or members of the military. But service members in combat zones continue to qualify for the combat pay exclusion.
Please let us know if you have any questions about the new law or your specific eligibility for the foreign income exclusion benefit in 2018.
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