The Bona Fide Residence Test for Expats

The Bona Fide Residence Test is the other way to qualify for the Foreign Earned Income Exclusion — you meet it if you've been a bona fide resident of a foreign country for an uninterrupted period that includes an entire tax year. "Bona fide" means you actually live there with the intent to stay indefinitely, not just temporarily. The IRS looks at factors like whether you have a permanent home there, your employment situation, where your family lives, and whether you filed as a resident in that country. One important rule: if you told the foreign country's government that you're only a temporary resident, the IRS will likely deny bona fide residence status even if you were there all year. This test is better suited to expats on open-ended assignments than to those on temporary work contracts.