The Physical Presence Test is one way the IRS determines whether a US taxpayer living abroad qualifies for the Foreign Earned Income Exclusion (FEIE). Passing this test can allow you to exclude up to $126,500 of foreign earned income in 2024, reducing or even eliminating your US tax liability.
Who Qualifies for the Physical Presence Test
- US citizens, resident aliens, or Green Card holders
- Must be physically present in one or more foreign countries for at least 330 full days within a 12-month period
- The 12-month period can begin or end in the tax year you’re filing for
If your qualifying period doesn’t cover the entire year, the FEIE maximum must be prorated based on the number of eligible days. Total Qualifying Days in 2024: 275 Days Pro-rated Amount: 275/366 Days = 0.7514 Maximum FEIE Amount: $126,500 x 0.7514 = $95,052.
Can I Claim the FEIE if I Don’t Meet the Physical Presence Test?
If a US expat spends less than 330 days abroad, they may still qualify for the Foreign Earned Income Exclusion using the Bona Fide Residence Test.
The Bona Fide Residence Test is another way the IRS can determine whether an American taxpayer is a resident of a foreign country.