What Is the Physical Presence Test?
The physical presence test is a tool used by the Internal Revenue Service (IRS) to determine whether a taxpayer qualifies for the foreign earned income exclusion when filing their taxes.
The test requires that a person be physically present in a foreign country or countries for at least 330 full days during a consecutive 12 months. The 330 days during which the person is abroad do not need to be consecutive.
Key Takeaways
- If you are a U.S. citizen or resident alien who spends more than 330 days living in a foreign country, you may be eligible to exclude the money you earn in that country from your U.S. taxes.
- That exclusion, called the Foreign Earned Income Exclusion, is available if you pass the physical presence test.
- The physical presence test is a measure of how many days (330 is the minimum) you spent in a foreign country or (from the other perspective) outside of the U.S.
Understanding the Physical Presence Test
The physical presence test allows taxpayers to exclude a certain amount of their foreign earned income. If you are a U.S. citizen or a resident alien of the United States and you live abroad, you are taxed on your worldwide income. However, you may qualify to exclude your foreign earnings from income up to an amount that is adjusted annually for inflation: $108,700 for 2021 and $112,200 for 2022.
People who qualify for this exclusion are also likely to qualify for the foreign housing deduction, which can also save them money on their taxes.
The foreign income exclusion is available to both citizens and resident aliens of the U.S. According to the tax code, a person’s reason for being abroad is irrelevant to this test. However, family emergencies, illness, and employer directives do not suffice as reasons to allow for the exclusion if one of those reasons causes the taxpayer to be present in a foreign country for less than the required 330 days. Furthermore, a "day" is considered a full 24-hour period, so days of arrival and departure in a foreign country do not count toward the 330 days.
A person may travel between foreign countries during their time abroad. Any time spent within the United States while in transit, such as during a layover between flights, does not count against the person’s 330 days, as long as the period of time within the U.S. is less than 24 hours.
Special Considerations
There are exceptions to the rule. If a person’s presence in a foreign country violates U.S. law, the government will not view them as physically present in that country for the time in which they violated the law. Any income earned within that country while violating U.S. law is not considered foreign earned income by the IRS.
The minimum time requirement may also be waived if the taxpayer must leave a foreign country due to war, civil unrest, or another condition that makes the country significantly unsafe or unlivable. If the taxpayer can demonstrate that they could have and would have reasonably met the requirements of the physical presence test if not for the adverse conditions and that they had a tax home in that country and were a bona fide resident of the country at the time, they may still qualify for the exclusion.
Pay received as military or civilian income while stationed abroad is not considered foreign earned income by the U.S. government.
FAQs
The test requires that a person be physically present in a foreign country or countries for at least 330 full days during a consecutive 12 months. The 330 days during which the person is abroad do not need to be consecutive.
What are the rules for the presence test? ›
IRS Substantial Presence Test generally means that you were present in the United States for at least 31 days in the current year and a minimum total of 183 days over 3 years, using the following equation: 1 day = 1 day in the current year. 1 day = 1/3 day in the prior year. 1 day = 1/6 day two years prior.
How many days do you need for physical presence test? ›
More In File
You meet the physical presence test if you are physically present in a foreign country or countries 330 full days during any period of 12 consecutive months including some part of the year at issue. The 330 qualifying days do not have to be consecutive.
What is the slide rule for physical presence test? ›
1) Slide days – if up to the point of expatriating or repatriating the taxpayer has been in a foreign country for more than a 330 full days in the 12 month fiscal consecutive period under Physical Presence Test, there is opportunity to use those 35 (36 leap year) or less days (365 (366 leap year) consecutive period ...
What is the physical presence test or the bona fide residence test? ›
The main difference between the two tests is that the Physical Presence Test relies on the time spent out of the U.S. while the Bona Fide Residence Test looks more into your intentions and activities while out of the country.
How do I know if I pass the substantial presence test? ›
If your "Total Days of Presence" is 183 or greater, then you pass the Substantial Presence Test and are a resident alien for tax purposes.
What is a physical presence in a state? ›
Physical presence is a nexus standard that requires only more than the slightest presence. Physical presence nexus creating activities include, but are not limited to: Having an employee working in the state. Having real or tangible personal property in the state.
What is proof of physical presence? ›
Employment and court records (including incarceration records) can also be used to prove physical presence. A Social Security statement can be helpful, but because income can be earned outside the U.S., it should be supported by other evidence.
What does having a physical presence mean? ›
Physical presence refers to the number of days the applicant must physically be present in the United States during the statutory period up to the date of filing for naturalization.
What is the meaning of physical presence? ›
Definition of "physical presence"
The actual location where an individual is present How to use "physical presence" in a sentence.
Applicants may submit employment records to prove a U.S. physical presence. Paystubs that cover a period of time or a W-2 are excellent examples. But you may use a variety of employment documents such as benefit records, training completions, attendance records, union membership records, etc.
What is the 30 month rule for citizenship? ›
Physically present in the U.S. for thirty months within the five year period before applying, or (see legal basis) Physically present in the U.S. for eighteen months within the three year period before applying in the case of qualified spouses of U.S. citizens (see legal basis)
What is the first slide rule? ›
In 1620 Edmund Gunter of Oxford developed a calculating device with a single logarithmic scale; with additional measuring tools it could be used to multiply and divide. In c. 1622, William Oughtred of Cambridge combined two handheld Gunter rules to make a device that is recognizably the modern slide rule.
How does IRS verify physical presence test? ›
To pass the Physical Presence Test, your situation must reflect all of the following: You must be a US citizen or a resident alien. You must be outside of the US and its territories for at least 330 days out of a consecutive 365. You must be legally inside your foreign country of residence.
What is the difference between physical presence and bona fide residence? ›
One of the differences between the physical presence test vs. the bona fide residence test is that the physical presence test is based on how long a person stays in a foreign country and is not dependent on the kind of residence established, the intentions of returning to the US, or the nature of the stay abroad.
What are the two most common types of residency tests? ›
- You are admitted to the United States as, or change your status to, a lawful permanent resident under the immigration laws (the Green Card Test), or.
- You meet the Substantial Presence Test (which is a numerical formula which measures days of presence in the United States).
The 183-day rule refers to a threshold used by most countries to determine whether an individual should be considered a resident for tax purposes. This number is often used in a tax context because it marks the point at which someone has spent more than half the calendar year in a particular jurisdiction.
What is the F-1 5 year rule? ›
Generally, foreign students in F-1, J-1, or M-1 nonimmigrant status who have been in the United States more than 5 calendar years become resident aliens for U.S. tax purpose if they meet the “Substantial Presence Test” and are liable for Social Security and Medicare taxes.
How do I know if I am a resident alien or nonresident alien? ›
If a person does not meet either the Green Card or Substantial Presence Test, then that person is classified as a non-resident alien. A new arrival on a J-1 or F-1 visa is generally a non-resident alien.
What is an example of a substantial presence test? ›
Example: An individual is present in the U.S. for 84 days in 2014, 168 days in 2013 and 261 days in 2012, then the test would show residency, with 183.5 days of presence.
