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Is the FEIE tax reduction, based on Physical Presence Test, prorated based on how many days you were outside of the country in the year?

Personal Finance & Money Asked on June 13, 2021

Let’s suppose that I am out of the USA from January 1st 2020 to December 31st 2020 for 335 days of the year.

So I do qualify, but instead of the full ~100k reduction, would I only get (335/365) * 100k = ~91K deduction?

2 Answers

Since you were out of the US for at least 330 days in the 12-month period of Jan-Dec 2020, you qualify for the Foreign Earned Income Exclusion for that 12-month period. (Note that the 12-month period used for the Physical Presence Test does not have to be Jan-Dec, and you can use multiple, potentially overlapping, 12-month periods in a calendar year. But in this case, the Jan-Dec period works.)

Since you qualify for the FEIE for the whole year (under the Physical Presence Test or the Bona Fide Residence Test), you get the entire exemption of $107,600 for 2020. You would only get a "partial" exclusion if the periods under which you qualify for the FEIE under the Physical Presence Test or Bona Fide Residence Test did not cover the whole year; e.g. you were out for 330 days in one or more 12-month periods, but those 12-month periods were not able to cover all of 2020.

Correct answer by user102008 on June 13, 2021

So I do qualify,

Sadly no !

but instead of the full ~100k reduction, would I only get (335/365) * 100k = ~91K deduction?

Sadly no.

It is a "BINARY" thing - yes or no only. No partial!

Answered by Fattie on June 13, 2021

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