Foreign Earned Income Exclusion physical presence test issue

[mp5]

Hi, I'm trying to fill out the dates for the physical presence test, but depending range I enter, the amount of federal tax I owe increases.

For example, if I do May 5, 2019 to May 4, 2020, the amount due is $0.

However if I do July 15, 2019 to July 14, 2020, I owe over $3000.

Does anyone know why this happens? I don't understand why it's not 0 for July. Thanks.

[AmeliesUncle]

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@mp5 wrote:

For example, if I do May 5, 2019 to May 4, 2020, the amount due is $0.

However if I do July 15, 2019 to July 14, 2020, I owe over $3000.

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The full year amount of the Foreign Earned Income Exclusion is $105,900.  For a partial year, it is prorated.   The date starting in May has more days in 2019 than the date starting in July, so the May prorated amount is larger than the July prorated amount.

It sounds like your actual foreign income is somewhere between those two prorated amounts, so the May date (larger prorated amount) is excluding the full amount, but the July date (smaller prorated amount) is cause part of your income to exceed the prorated exclusion amount.

[mp5]

Thank you, that makes sense.

Am I allowed to have my start date be in 2018 and end in 2019 then (July 1 2018 to June 30 2019 for example)? Or must the end date be in the year 2020?

[DawnC]

It can be either.    You meet the physical presence test if you are physically present in a foreign country or countries 330 full days during any period of 12 consecutive months including some part of the year at issue. The 330 qualifying days do not have to be consecutive.

The physical presence test applies to both U.S. citizens and U.S. resident aliens and is based only on how long you stay in a foreign country or countries. This test does not depend on the kind of residence you establish, your intentions about returning to the United States, or the nature and purpose of your stay abroad. However, your intentions with regard to the nature and purpose of your stay abroad are relevant in determining whether you meet the tax home test, as explained under Chapter 4 of Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad.

[mp5]

So just to confirm -- even though I am trying to exclude the foreign income I made in 2019, the end date can fall anywhere in the year 2019?

[SusanY1]

Yes, the 330 out of 365 days must be part of any 12-month period that includes any part of the year you wish to exclude. The ending (or beginning) date for your 330 days can be any time, even the first (or last) day of the tax year. 

 However, when you are physically present in the foreign country for less than the full tax year, the amount of income that you can exclude is pro-rated based on the number of days that you are present.  

So, there are two parts.  There is the part where you will qualify for the exclusion, which can have any end or begin date within the tax year, and the number of days used to determine the amount of your exclusion.  

@mp5

[mp5]

Thank you. I understand much better now.