Archie, a US citizen whose abode remains in Florida, takes a year-long sabbatical from his job as an aerospace engineer and spends 345 days living abroad. While away, he works various jobs to finance and enrich his stay. Identify the statement below about the foreign earned income exclusion that is correct?

1.Archie’s tax home is in Florida; Archie does not qualify for the foreign earned income exclusion

2.Archie must earn at least $107,600 before any foreign income can be excluded

3.If Archie is married, only the spouse with the higher foreign earned income may use the exclusion

4.Archie satisfies the bona fide residence test

Answer

1

Explanation

If you maintain an abode in the US, you will be ineligible to have a tax home in a foreign country. An abode is one's home, habitation, residence, domicile, or place of dwelling. Archie’s tax home remains in Florida, so he doesn’t qualify for the exclusion. The tax home must be in a foreign country. A tax home is a place where a taxpayer permanently or indefinitely engages to work as an employee or self-employed individual. The tax home is not in a foreign country for any period in which the taxpayer’s abode is in the United States.

Taxpayers can exclude up to $107,600 (per spouse) in 2020.

Archie meets the physical presence test (at least 330 full days) not the bona fide residence test (entire tax year).