Tax Guide, Americans Abroad
Tax Home in Foreign Country

Tax Home and Foreign Country Requirements

To qualify for the Foreign Earned Income Exclusion (FEIE), the foreign housing exclusion, or the foreign housing deduction, you must have a tax home in a foreign country during the period in which you meet either the bona fide residence test or the physical presence test. Both the tax home requirement and the foreign country requirement must be satisfied.

What Counts as a Foreign Country

To meet either test, you must live in or be physically present in a foreign country. A foreign country is any territory under the sovereignty of a government other than that of the United States, including its airspace, territorial waters, and certain seabed and subsoil areas where that country has exclusive rights to natural resources.

A foreign country does not include U.S. territories or possessions such as Puerto Rico, Guam, the U.S. Virgin Islands, American Samoa, or the Northern Mariana Islands. It also does not include the Antarctic region, ships or aircraft traveling in or above international waters, or offshore installations located outside the territorial waters of any nation.

For FEIE and housing purposes, the terms “foreign,” “abroad,” and “overseas” refer only to areas outside the United States and its territories.

What Is a Tax Home?

Your tax home is the general area of your main place of business, employment, or post of duty, regardless of where your family lives. You have a tax home in a foreign country if you are permanently or indefinitely engaged to work there and your abode is not in the United States.

If you have no regular place of business, your tax home may be where you regularly live. If you have neither a regular place of business nor a regular place of living, you are considered itinerant, and your tax home is wherever you work.

Abode vs. Tax Home

Your abode is your home in the domestic, personal sense — where your family, economic, and personal ties are strongest. It is not the same as your tax home and does not refer to your principal place of business. Courts have described ‘abode’ as one’s home, residence, or place of dwelling. Your abode is in the United States if your primary personal and family ties remain there, even if you work abroad.

Being temporarily in the United States does not automatically place your abode there. Maintaining a U.S. dwelling also does not automatically mean your abode is in the United States, even if your spouse or dependents use the dwelling.

Example 1: You work 28 days on and 28 days off on an offshore oil rig in the territorial waters of a foreign country. You return to your family home in the United States during your off periods. Your abode remains in the United States, so you do not have a foreign tax home and cannot claim the FEIE or housing benefits.

Example 2: You are transferred from Ohio to London for at least 18 months. You move your family, rent out your U.S. home, obtain local licenses, open local bank accounts, and integrate into the community. Your abode is in London, so you have a foreign tax home.

Temporary vs. Indefinite Assignments

Whether your assignment is temporary or indefinite determines where your tax home is. If your assignment abroad is temporary (expected to last 1 year or less), your tax home remains in the United States. If your assignment is indefinite (expected to last more than 1 year), your tax home shifts to the foreign country.

If your expectation changes, an assignment expected to last 1 year or less remains temporary until the date you expect it to last longer than 1 year. Once you expect it to exceed 1 year, it becomes indefinite from that point forward.

For more detailed guidance, see Revenue Ruling 93-86.