Bona Fide Foreign Resident
What Is a Bona Fide Foreign Resident?
Any resident of a foreign country who meets the Internal Revenue Service (IRS) criteria for the bona fide residence test. This test groups any person who lives in any foreign country for a continuous period that incorporates a whole tax year — characterized as the period from January 1 through December 31, as a Bona Fide Foreign Resident. Any individual falling into this category is eligible for the foreign earned income exclusion, which may altogether reduce taxable income and may avoid an individual's housing expenses. Bona Fide Foreign Residents must be either U.S. residents living abroad or resident outsiders of a country with which the U.S. has a legitimate tax treaty in effect.
Figuring out Bona Fide Foreign Resident Status
Bona Fide Foreign Residence status is conceded exclusively to the individuals who have set long-term foreign residence aims.
Bona Fide Foreign Residence status is in this manner not consequently extended to an individual essentially in light of the fact that they have lived in a foreign country for a year or more. For instance, somebody who goes to a foreign country for a finite contracted job, for example, a construction contractor or a counseling function, doesn't naturally receive a Foreign Residence status- - regardless of whether such work opportunities surpass one year in duration.
For instance, somebody who goes to London to open an art display at an exhibition hall, who is credited a crash cushion as brief housing quarters, wouldn't be conceded Bona Fide Foreign Residence status. However, an individual who buys a home abroad and moves their whole family to reside overseas for the long take would probably be conceded Foreign Residence status — regardless of whether they leave the country for brief excursions back to the United States and different countries, for vacation or business purposes. Nonetheless, in such cases, individuals must show clear goals of getting back from such outings, without preposterously extensive deferrals, back to the foreign residence being referred to.
How Status is Determined
The determination of a Bona Fide Foreign Residence status is settled dependent upon the situation, figuring in such contemplations as the timeframe lived abroad, and the idea of the justification behind the relocation. The decision is eventually made by the IRS, to a great extent founded on data an individual reports on Form 2555, Foreign Earned Income, which allows individuals to compute foreign earned income exclusion and housing exclusion or deductions.