Physical Presence Test for Foreign Citizens after First Year of Residency

[mlysikov]

My wife and I are Ukrainian citizens who come to US in June 2019 under L1/L2(work) visas.

My wife visited US in January 2019 for a business trip for 15 day, so she must be qualified as a resident started from January (first day of visit was in January and actual presence in US was more than 10 days, total presence in 2019 is more than 183 days). She was physically presented in foreign countries for 336 days during June 2018 - June 2019.

Is she qualified for Physical Presence Test and foreign income exclusion for 2019?

[KurtL1]

Yes,your wife meets the Physical Presence Test for the Foreign Income Exclusion and the Substantial Presence Test to qualify your wife as a Resident Alien for tax purposes.

Physical Presence Test: Physical Presence Test

Generally, to meet the physical presence test, you must be a U.S. citizen or resident alien who is physically present in a foreign country, or countries, for at least 330 full days during any period of 12 months in a row. A full day means the 24-hour period that starts at midnight.The 12-month period on which the physical presence test is based must include 365 days, part of which must be in 2019. The dates may begin or end in a calendar year other than 2019.

Substantial Presence Test: Substantial Presence Test

You will be considered a United States resident for tax purposes if you meet the substantial presence test for the calendar year. To meet this test, you must be physically present in the United States (U.S.) on at least:

1. 31 days during the current year, and
2. 183 days during the 3-year period that includes the current year and the 2 years immediately before that, counting:
   • All the days you were present in the current year, and
   • 1/3 of the days you were present in the first year before the current year, and
   • 1/6 of the days you were present in the second year before the current year.

[mlysikov]

Thank you for the reply.

2 more questions:

1. can my wife and I make a choose to be treated as resident aliens for the entire 2019 (both of us were not residents at the beginning of the year and were residents at the end of the year), fill jointly and then apply together for foreign income exclusion (both of us meet the physical presence test)?

2. If we claim the foreign income exclusion, can we also claim the standard or itemized deductions for 2019 or only 1 of this benefit can  be claimed? Can standard deduction be claimed in future (e.g. for 2020) if foreign income exclusion were claimed before (for 2019)?

[KurtL1]

If both you and your wife both meet the Substantial Presence Test you are both considered Resident Aliens for the 2019 tax year. You are eligible to file on Form 1040 using the Married Filing Jointly filing status.

Claiming the Foreign Income Exclusion does not keep you from electing either the Standard Deduction or Itemizing your deductions on Schedule A.

You should enter all your tax information on:the following items:

• Medical expenses
• Taxes paid;
• Mortgage Interest; 
• Charitable contributions; and 
• Casualty Loses (If qualified).

The TurboTax software will select the larger of the Standard Deduction or Itemized Deductions on your return.

The Foreign Income Exclusion can be used in any year that you qualify for the deduction. Using it in the current tax year does not keep you from taking it in any subsequent tax years.

[mlysikov]

Thanks, that clarifies my question for the federal income portion.

Does the same approach apply for the California state income, i.e. making a choice to be treated as resident aliens for the entire 2019?