Physical-Presence Test

AAA

DEFINITION of 'Physical-Presence Test'

Similar to the bona fide foreign residence test, the physical-presence test allows taxpayers to claim the foreign earned income exclusion. The test mandates that a taxpayer must be physically present in a foreign country for at least 330 full days out of the year in order to claim the exclusion. The days do not have to be consecutive and the test applies both to U.S. citizens and resident aliens.

INVESTOPEDIA EXPLAINS 'Physical-Presence Test'

The reason for being abroad is irrelevant to this test. However, a family emergency, illness or employer directive is not a sufficient reason to allow for the exclusion if it 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 required time.

RELATED TERMS
  1. IRS Publication 597

    A document published by the Internal Revenue Service (IRS) that ...
  2. 183-Day Rule

    The 183-day rule is part of the "substantial presence test" used ...
  3. Foreign Housing Exclusion And Deduction

    An allowance for taxpayers who live and work in a foreign country ...
  4. Home Office

    An office located inside the taxpayer's home that serves as the ...
  5. Bona Fide Foreign Resident

    Any resident of a foreign country that meets the IRS criteria ...
  6. Deduction

    Any item or expenditure subtracted from gross income to reduce ...
RELATED FAQS
  1. Which states are the most expensive for high-income earners?

    The most expensive states for high-income earners are California, Hawaii and New York. The tax rates assessed by these states ... Read Full Answer >>
  2. How can I find out which income tax bracket I am in?

    U.S. federal tax brackets are based on filing status (single, married filing jointly, married filing separately or head of ... Read Full Answer >>
  3. Can a Limited Liability Company (LLC) issue stock?

    A limited liability company, or LLC, cannot issue stock. Instead, an LLC is structured to have single or multiple owners ... Read Full Answer >>
  4. How do I calculate my effective tax rate using Excel?

    Your effective tax rate can be calculated using Microsoft Excel through a few standard functions and an accurate breakdown ... Read Full Answer >>
  5. What is the difference between income tax and capital gains tax?

    The conceptual difference between income tax and capital gains tax is that income tax is the tax paid on income earned from ... Read Full Answer >>
  6. What is the optimal level of withholding tax to enter on my W-4?

    Most workers in the United States have part of their income withheld from each paycheck. This step is required by the federal ... Read Full Answer >>
Related Articles
  1. Taxes

    Get A Tax Credit For Your Foreign Investments

    The foreign tax credit provides a break on investment income made and taxed in a foreign country.
  2. Taxes

    5 Tax Credits You Shouldn't Miss

    If you're not taking advantage of these deductions, you could be missing out on tax savings.
  3. Taxes

    Give Your Taxes Some Credit

    A few tax credits can greatly increase the amount of money you get back on your return.
  4. Taxes

    Explaining Progressive Tax

    A progressive tax is a levy in a tax system where the tax rate increases as the taxable base increases.
  5. Taxes

    Understanding Income Tax

    Income tax is a levy many governments place on revenue of entities within their jurisdiction.
  6. Economics

    What is a Tax Liability?

    Tax liability is the amount of money a person or entity owes to the government as the result of a taxable event.
  7. Taxes

    Top 4 Ways to Invest Tax Free

    When you're ready to invest, start by looking at these 4 tax-advantaged ways to build your portfolio and your future.
  8. Taxes

    Missed The Tax Return Deadline? Here's What To Do

    Most important: Do it now.
  9. Taxes

    Are Taxes the Solution for Income Inequality?

    Income inequality continues to increase. Why? And are taxes the solution?
  10. Retirement

    Some Tax Considerations For Your Retirement Income

    Even if you don’t plan to retire, it’s still a good idea to think ahead about where to live, your income and how it all interacts with Social Security.

You May Also Like

Hot Definitions
  1. Butterfly Spread

    A neutral option strategy combining bull and bear spreads. Butterfly spreads use four option contracts with the same expiration ...
  2. Unlevered Beta

    A type of metric that compares the risk of an unlevered company to the risk of the market. The unlevered beta is the beta ...
  3. Moving Average - MA

    A widely used indicator in technical analysis that helps smooth out price action by filtering out the “noise” from random ...
  4. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  5. Productivity

    An economic measure of output per unit of input. Inputs include labor and capital, while output is typically measured in ...
  6. Variance

    The spread between numbers in a data set, measuring Variance is calculated by taking the differences between each number ...
Trading Center