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inarinat
New Member

I am a US Citizen, but I live and work in Japan at a university. I will spend a year in US from Aug 2018-August 2019, paid by my university. Can I still file FEIE?

I am a US Citizen, but I live in work in Japan as a university professor. Next year, as a sabbatical, I will spend a year in US from Aug 2018-August 2019. As far as my understanding of residency, I will still be a Japan resident since my plan to be in the United States is clearly just the one year. So, I have a few questions: 1) can I still file for the FEIE (as I normally do each year) or do I have to file for foreign tax credit? 2) If I work in the United States during my sabbatical and earn income, does that change my filing in any way? 3) I also will have some capital gains from stock investments during that time...I already have to file for that, so I assume it wouldn't affect anything, but would it? 4)I want to use Turbo Tax to do my taxes next year and the year after. Can the system handle my type of situation?
4 Replies
TaxGuyBill
Level 9

I am a US Citizen, but I live and work in Japan at a university. I will spend a year in US from Aug 2018-August 2019, paid by my university. Can I still file FEIE?

1)  Probably.  You probably will meet the 330 day Physical Presence Test for 2018 if you use the 12 month period of August 2017-Auguest 2018.  Or you may qualify for the Bona Fide Residence Test: <a rel="nofollow" target="_blank" href="https://www.irs.gov/individuals/international-taxpayers/foreign-earned-income-exclusion-bona-fide-re...>
TaxGuyBill
Level 9

I am a US Citizen, but I live and work in Japan at a university. I will spend a year in US from Aug 2018-August 2019, paid by my university. Can I still file FEIE?

2)  No, it won't change anything other than that income would be taxable.  The excluded Foreign Earned Income would likely put your taxable income into a higher tax bracket.

3)  No.  Pretty much the same answer as #2.

4)  Yes, TurboTax should be able to handle it.  Just be sure to maximize the 330 day Physical Presence Test by choosing the best 12 month period (such as September 2017-September 2018, which puts more days into the 2018 year).
inarinat
New Member

I am a US Citizen, but I live and work in Japan at a university. I will spend a year in US from Aug 2018-August 2019, paid by my university. Can I still file FEIE?

Thanks very much for taking the time to answer. As I look at your response and that of pk's response after yours, it sounds like a complex situation that might require a tax professional rather than me doing it on Turbo Tax. My understanding with bonafide residence is that since I live in Japan, and I am paid by a Japanese company (i.e., university), that even though I will be living in the US, my bonafide residence remains in Japan, so I should be able to file for the Foreign Earned Income Exclusion. Quoting from the link TaxGuyBill put above for bonafide residence: "Questions of bona fide residence are determined on a case-by-case basis, taking into account such factors as your intention or the purpose of your trip and the nature and length of your stay abroad. ... The IRS cannot make this determination until you file Form 2555." It seems to me I can argue that my tax home is in Japan even though I am in the United States...but, this all may be over my head. Wanted to do it myself, but I don't want a bunch of problems down the line. Thanks very much for your thoughts!!
pk
Level 13
Level 13

I am a US Citizen, but I live and work in Japan at a university. I will spend a year in US from Aug 2018-August 2019, paid by my university. Can I still file FEIE?

Adding a little  SU TaxGuyBill's answer,  -- note one item 1 above.  Whereas you can find a period to qualify for the  FEI Exclusion, the actual amount  eligible for exclusion would be reduced  because your foreign tax home would  cover only Jan 2018 thru  July/Aug 2018.  From the time you enter the USA ( or 35 days thereafter ) , your  income ( even though from a foreign source and taxed  by the Foreign country ), would be only eligible for foreign tax credit.   At the same time , I suppose one could make an argument that sabbatical pay is really based on work done  during the prior  X-many years and therefore is eligible for FEI exclusion --- have not seen caselaw on this .  This is my opinion

I agree with all the other responses by SU TGB

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