If you are living and working in a foreign country for a prolonged period, your tax home is probably in that country. If you are working in a foreign country but frequently returning to the U.S. when you are not working, you probably have maintained your tax home in the U.S., but that is a determination that you must make. The answer is essential to whether you qualify for the Foreign Income Exclusion.
The following guidance is taken from the IRS Instructions for Form 2555, to which you should refer for further help:
"Tax home test. To meet this test, your
tax home must be in a foreign country, or
countries (see Foreign country, earlier),
throughout your period of bona fide
residence or physical presence,
whichever applies. For this purpose, your
period of physical presence is the 330 full
days during which you were present in a
foreign country, not the 12 consecutive
months during which those days occurred.
Your tax home is your regular or
principal place of business, employment,
or post of duty, regardless of where you
maintain your family residence. [Emphasis added.] If you don't
have a regular or principal place of
business because of the nature of your
trade or business, your tax home is your
regular place of abode (the place where
you regularly live).
You aren't considered to have a tax
home in a foreign country for any period
during which your abode is in the United
States. However, if you are temporarily
present in the United States, or you
maintain a dwelling in the United States
(whether or not that dwelling is used by
your spouse and dependents), it doesn't
necessarily mean that your abode is in the
United States during that time."
