Bona fide residence is a term used in tax law to determine whether an individual qualifies for the foreign earned income exclusion. The bona fide residence test is one way that an individual can qualify for this exclusion. To pass the bona fide residence test, an individual needs to reside in a foreign country for an uninterrupted period that includes an entire tax year. In addition, the test takes into account factors such as the individuals intention, the purpose of the trip, and the length and nature of the stay. The following are the qualifications for the bona fide residence test:
- You must be a U.S. citizen or resident alien living in a country that has a tax treaty with the U.S.
- You must have set up residence in a foreign country.
- You must reside in the foreign country for an uninterrupted period that includes an entire tax year.
It is important to note that the bona fide residence is not always the same as the domicile, which is defined as ones permanent home. The bona fide residence test can be used if an individual intends to live in a foreign country indefinitely and is there for at least one calendar year. The test can be used if an individual is a bona fide resident of a foreign country or countries for an uninterrupted period that includes a calendar year.
