Bona fide residence test expat playbook: tax home, full tax year, and how to qualify under IRC Section 911

The bona fide residence test expat path differs from the physical presence test in three fundamental ways: how qualification is proven, how much US presence is allowed during the qualifying period, and how facts-and-circumstances flexibility is balanced against mechanical certainty. The bona fide residence test under IRC Section 911(d)(1)(A) requires the taxpayer to be a bona fide resident of a foreign country for an uninterrupted period that includes an entire tax year, judged on facts and circumstances under Treas. Reg. Section 1.911-2. The physical presence test under Section 911(d)(1)(B) requires the taxpayer to be physically outside the US for at least 330 full days during any 12-month period, a mechanical day-count rule.

The qualification proof differs substantially. Physical presence requires travel records, passport stamps, and a travel log showing the 330 days outside the US during the relevant 12-month period. The proof is mechanical and quantitative. Bona fide residence requires evidence of residential connections to the foreign country including housing arrangements, family presence, social and community ties, foreign tax filings, and intent to remain for an extended or indefinite period. The proof is qualitative and multi-factor, requiring documentation of various connections rather than just travel records.

US presence allowance differs critically. Physical presence permits a maximum of 35 days in the US per 12-month period (since 330 days outside means at most 35 days inside). The 35-day allowance is strict and can be exceeded easily by an expat who needs to spend significant time in the US for family, business, or legal reasons. Bona fide residence has no day-count limit. A bona fide resident can spend 60, 90, or even more days in the US during the qualifying year as long as her foreign residence pattern continues throughout the year. The flexibility matters substantially for expats with US obligations.

Strategic year selection differs. The physical presence test uses any 12-month period that produces 330 qualifying days, allowing the taxpayer to improve the period to capture income earned during a specific window. The bona fide residence test uses the tax year as the qualifying unit. Bona fide residence requires an entire calendar year of foreign residence (for calendar-year taxpayers) to establish the qualification, with adjacent partial years also qualifying under Section 911(d)(2). The structural difference affects timing of moves and claim strategy.

Initial qualification timing differs. A taxpayer who moves abroad in March can qualify under physical presence by the end of February of the following year (after 12 months outside the US with at least 330 qualifying days). The same taxpayer can qualify under bona fide residence only after completing a full subsequent calendar year of foreign residence, which means waiting until the end of December of the year after the move. For first-year expats, the physical presence test typically provides earlier FEIE qualification.

Subsequent year flexibility differs. Once bona fide residence is established for one full tax year, the test continues to apply automatically for subsequent years as long as the residential pattern continues. The taxpayer doesn’t need to recount days each year. The physical presence test must be recomputed each year, which can become administratively burdensome for long-term expats and can disqualify expats who increase their US presence over time. Bona fide residence is more sustainable for multi-year expat assignments.

Audit and challenge differ. Physical presence test audits typically focus on travel records and the 330-day count, which produces clean wins or losses based on documented travel days. Bona fide residence audits examine the facts and circumstances of foreign residence, which is more subjective and harder to predict. The IRS has won and lost various bona fide residence cases based on the specific facts. Taxpayers with marginal bona fide residence facts (rotating assignments, family in the US, frequent US visits) may prefer the mechanical certainty of physical presence even if it constrains US presence.

Practical strategic choice. Many expats use physical presence for the first year abroad (to qualify immediately without waiting for a full calendar year of residence) and transition to bona fide residence in year two and beyond (for the flexibility on US presence). Some expats stay on physical presence throughout if their US presence is limited and they prefer the mechanical certainty. Other expats use bona fide residence throughout because they need US presence flexibility or because their foreign residence is clearly substantive.

Where The Reed Corporation adds value. We analyze the bona fide residence test expat versus physical presence test strategic choice for each client based on the specific facts of the year, document the qualification under whichever test applies, prepare Form 2555 with the appropriate Part II (bona fide residence) or Part III (physical presence) sections, defend the FEIE claim in IRS examination if challenged, integrate the FEIE planning with foreign tax credit analysis, and coordinate with state residency planning to manage state tax exposure. The bona fide residence test expat strategic analysis runs every year for our expat clients. See our expat tax services for the integrated practice. The differential between the two tests also affects audit defense strategy. Physical presence test audits typically resolve quickly with clean travel documentation. The bona fide residence test expat audits can extend much longer because the facts-and-circumstances determination invites detailed examination of the taxpayer’s foreign life. Audits that take 12 months or longer aren’t unusual for bona fide residence claims with marginal facts. The longer audit timeline ties up the taxpayer’s records and attention, creates stress, and produces uncertainty about the eventual outcome. We prepare bona fide residence claims with thorough documentation to minimize audit duration when challenged. Annual maintenance of the bona fide residence test expat documentation file reduces the year-over-year work required to defend the position and supports the longest expat assignments with the cleanest documentation trail. The choice between the two tests also affects how the taxpayer documents and reports the FEIE position. Physical presence test claims include the day-by-day travel log with Form 2555 Part III. Bona fide residence claims include Form 2555 Part II with the foreign country identification, residence dates, visa or immigration status, and family information. Each approach has its own reporting expectations and audit defense profile. We prepare each year’s Form 2555 with the appropriate part completed based on the strategic choice and the supporting documentation, integrating the choice with the broader expat tax return preparation work.

The IRS expects substantial documentation for a bona fide residence test expat claim because the test is facts-and-circumstances and the taxpayer bears the burden of proving each element. The documentation falls into several categories: foreign residential arrangements, family and personal connections, foreign tax filings and immigration status, intent and duration of foreign stay, and travel records showing the pattern of foreign presence. The documentation should be assembled contemporaneously rather than reconstructed after the fact, because contemporaneous records carry more weight in IRS examination.

Foreign residential arrangements documentation includes the long-term residential lease or property deed in the taxpayer’s name, foreign utility bills (electricity, water, internet, mobile phone), foreign furniture and household goods purchase records, foreign bank account statements showing residential payments, and photographs of the foreign residence showing personal items and substantive habitation. The residential documentation establishes that the taxpayer actually lives in the foreign country in a substantive way rather than maintaining a hotel-style temporary presence.

Family and personal connections documentation includes school enrollment records for children, employment or activity records for the spouse, foreign social club memberships, foreign religious community involvement, foreign professional association memberships, and similar evidence of the taxpayer’s family and social life centered in the foreign country. The family and social documentation supports the bona fide residence position because it shows the taxpayer’s center of vital interests is in the foreign country rather than the US.

Foreign tax filings and immigration status documentation includes copies of foreign tax returns filed during the qualifying period, foreign tax residence certificates, work visas or residency permits, and statements from foreign authorities regarding the taxpayer’s residency status. The bona fide residence test expat position is strongest when the foreign country also treats the taxpayer as a tax resident under its own rules. The foreign tax filings and residency certificates align the US and foreign tax positions and support consistency across jurisdictions.

Intent and duration documentation includes the employment contract specifying an indefinite or extended assignment, employer correspondence regarding the assignment, the taxpayer’s own statements (in emails, letters, social media) about her plans, immigration applications showing intent to remain for extended periods, and similar evidence of indefinite or open-ended foreign presence. A definite short-term assignment (specific end date, scheduled return to the US) undermines the bona fide residence position because it suggests temporary presence rather than residence.

Travel records documentation includes a contemporaneous travel log showing each entry to and exit from the foreign country, passport stamps and boarding passes, US Customs and Border Protection records (available through CBP’s online portal), credit card and bank statements showing transactions in the foreign country and during US visits, and similar evidence of the actual time spent in each location. The travel records support the position that the taxpayer’s pattern of presence is consistent with foreign residence rather than US residence with occasional foreign trips.

Sochurek v. Commissioner (1962) is the leading case on bona fide residence factors. The Sochurek court identified several factors that have shaped IRS analysis ever since: intention of the taxpayer, establishment of a home in the foreign country, participation in social and cultural activities, physical presence in the foreign country consistent with employment, and assumption of economic burdens normally falling on residents (foreign tax obligations, foreign social insurance, foreign professional fees). The factors are not exhaustive and not mechanically weighted, but they shape the documentation expectations.

Form 2555 disclosures themselves serve as documentation. The taxpayer represents in Part II that she’s a bona fide resident of a specific foreign country for a specific period, identifies the foreign country and the dates of residence, describes the type of visa or immigration status, lists family members residing with the taxpayer abroad, and answers questions about US visits and any statements made to foreign authorities. The Form 2555 statements should be accurate and supported by the underlying documentation.

The audit-ready file approach. We recommend that expat clients maintain an audit-ready file from day one of the foreign assignment, with the documentation organized by category and updated annually. The file should include the items described above plus contemporaneous notes on significant events affecting bona fide residence (changes in employment terms, family moves, immigration status changes, foreign tax filings). If the IRS examines the FEIE claim, the audit-ready file dramatically simplifies the response and improves the outcome.

Where The Reed Corporation adds value. We help expat clients build and maintain the documentation file supporting the bona fide residence test expat claim, prepare Form 2555 with accurate and supported disclosures, defend FEIE claims in IRS examination, coordinate with foreign tax advisors on cross-border consistency, and integrate the bona fide residence documentation with broader expat tax planning including FBAR, FATCA, and foreign tax credit work. See our tax strategy consulting service for the integrated expat practice. Long-term expat clients accumulate substantial documentation over multi-year foreign assignments. The bona fide residence test expat file for a 5-year or 10-year expat assignment can fill multiple boxes (or many gigabytes of digital storage). We help expat clients organize the documentation by year and by category so the file remains usable for audit defense across the full statute of limitations period. The organization includes a year-by-year summary memo, a thorough expense and income summary, the underlying source documents indexed by category, and contemporaneous notes on significant events affecting the bona fide residence claim. The organized documentation reduces audit response time substantially when the IRS examines a multi-year FEIE pattern. The Sochurek factors continue to guide IRS analysis 60+ years after the original case. The case identified the framework that shaped subsequent regulations and Tax Court decisions. The current Treas. Reg. Section 1.911-2(c) incorporates the Sochurek approach with refinements. Tax Court cases continue to address bona fide residence questions and produce ongoing guidance. We track the developing case law and apply current authority to our expat clients’ bona fide residence positions. The documentation framework should reflect current authority rather than relying on outdated checklists from earlier eras of FEIE compliance. Recordkeeping technology has advanced substantially in recent years, with cloud-based services that capture travel records, foreign currency conversions, and expense documentation automatically. Modern expat tax practice uses these tools to maintain thorough records with much less manual effort than traditional paper-based or spreadsheet-based approaches. The bona fide residence test expat documentation file built using current technology approaches stays current, accessible across devices, and audit-ready without consuming excessive client time. We integrate technology-enabled recordkeeping with the broader expat tax practice for clients who want efficient documentation processes.

The bona fide residence test expat path provides FEIE qualification for federal income tax purposes but doesn’t eliminate self-employment tax under IRC Section 1401. The interaction is important for freelancers, consultants, and other self-employed expats because the SE tax can substantially reduce the after-tax benefit of an expat arrangement. A self-employed US citizen working abroad excludes her earned income from federal income tax under Section 911 (subject to the $132,900 maximum for 2026) but still owes SE tax of 15.3% on net earnings up to the Social Security wage base ($184,500 for 2026) plus 2.9% Medicare above the wage base plus 0.9% additional Medicare above $200,000.

Practical example. A US citizen consultant who is a bona fide resident of Singapore earns $200,000 of net self-employment income in 2026. FEIE excludes $132,900 from federal income tax. The remaining $67,100 is taxed at federal income tax rates after deductions. Self-employment tax applies to the full $200,000 net SE earnings: 12.4% Social Security on $184,500 wage base = $22,878, plus 2.9% Medicare on $200,000 = $5,800, plus 0.9% additional Medicare on $0 (below $200,000 threshold) = $0. Total SE tax: $28,678. The SE tax substantially eats into the FEIE benefit because it applies regardless of FEIE.

Totalization agreements provide relief in some countries. The US has totalization agreements with 30+ countries (UK, Germany, France, Switzerland, Australia, Canada, Japan, Korea, several others) that eliminate dual social security taxation. Under the agreements, the taxpayer pays social security to one country (typically the country of work) and is exempt from social security in the other. A US citizen consultant working in Germany under the US-Germany totalization agreement pays German social security on her self-employment income and is exempt from US SE tax. The savings can equal or exceed the FEIE income tax savings.

Countries without totalization agreements (most of Southeast Asia including Singapore, most of the Middle East, most of Latin America except Chile and Brazil) leave the expat consultant paying full US SE tax on her foreign self-employment income. The total US tax burden in those jurisdictions includes income tax on income above the FEIE plus SE tax on the full SE earnings amount. The total burden can reduce the attractiveness of self-employed expat arrangements in non-totalization countries.

Foreign social security contributions matter. Even in non-totalization countries, the expat consultant typically owes foreign social security or equivalent contributions on her foreign-source income. The foreign contributions are paid in addition to (not instead of) US SE tax. Some countries (Singapore, Hong Kong, UAE) have relatively low social security obligations for self-employed foreigners, while others (Germany, France, Switzerland) have high obligations. The total social security burden across both jurisdictions can run 25% to 35% of net SE earnings in worst-case scenarios.

Entity structure planning can address the SE tax issue. A US citizen consultant operating through a foreign corporation (Singapore Pte Ltd, UK Ltd, etc.) might avoid US SE tax on income earned through the foreign corporation, depending on the entity structure and the controlled foreign corporation rules under IRC Subpart F. The CFC rules under Section 951A (GILTI), Section 951 (Subpart F), and related provisions tax US shareholders on certain foreign corporate income currently. The entity structure analysis is complex and requires careful planning to balance US and foreign tax considerations.

S-corp election as an alternative. A US citizen consultant operating through a US LLC that elects S-corp tax treatment under IRC Subchapter S can split her income between W-2 wages (subject to FICA) and K-1 distributions (not subject to SE tax). The S-corp structure can work with FEIE if the foreign work qualifies the W-2 wages as foreign earned income. The interaction between S-corp and FEIE is technical but generally works for self-employed expats with substantial income. The structure requires careful planning to avoid US payroll tax issues and to align with the bona fide residence test expat position.

Foreign housing exclusion interaction. The foreign housing exclusion under Section 911(c) applies on top of the FEIE for qualified housing expenses above the base amount. The housing exclusion increases the total income excluded from federal income tax but doesn’t change the SE tax exposure. A self-employed expat in a high-cost city (Hong Kong, London, Singapore) can claim substantial housing exclusion on top of the $132,900 FEIE maximum, reducing federal income tax further while leaving SE tax obligations unchanged.

Strategic comparison for self-employed expats. The expected after-tax position from an expat arrangement depends on the FEIE benefit, the SE tax burden, the foreign social security burden, the foreign income tax (after foreign tax credits), and the cost of living differential. We model the full after-tax outcome for self-employed expat clients before they make commitment decisions about foreign assignments. The bona fide residence test expat path produces meaningful federal income tax savings but doesn’t address SE tax, which can be the largest US tax burden for self-employed expats.

Where The Reed Corporation adds value. We model the after-tax impact of bona fide residence test expat arrangements for self-employed clients including FEIE, foreign housing exclusion, SE tax, foreign social security, totalization agreement positions, and foreign tax credit interactions, prepare Forms 2555 and Schedule SE and Form 1040, coordinate with foreign tax advisors on local compliance, advise on entity structure alternatives including foreign corporations and S-corp elections, and integrate the SE tax planning with broader expat strategy. See our business management service for the integrated work. The bona fide residence test expat self-employed analysis includes attention to the LLC versus corporation election for the expat’s business structure. A US LLC can elect S-corp tax treatment to address some of the SE tax issue, with the W-2 wage portion qualifying for FEIE and the K-1 distribution portion not subject to SE tax. The structure works for self-employed expats with substantial income above the FEIE maximum where the reasonable comp determination can be structured to support meaningful K-1 distribution. The election requires Form 2553 filing and creates ongoing corporate compliance obligations, so the cost-benefit analysis depends on the income level. We model the structure options for self-employed expat clients with attention to total US and foreign tax burden across all the relevant taxes (federal income, SE, state, foreign income, foreign social security).

The bona fide residence test expat audit risks center on three areas: the facts-and-circumstances determination of residence itself, the tax home and abode rules that gate both FEIE tests, and the foreign source income characterization that determines what qualifies for exclusion. The IRS audits FEIE claims selectively based on examiner discretion, with higher audit rates for claims involving large exclusions, complex foreign arrangements, and inconsistent reporting across years. The audit defense depends on the documentation maintained throughout the qualifying period.

The bona fide residence determination is the most subjective audit area. The IRS can challenge the residence claim based on the various factors discussed in Sochurek and subsequent cases. Common audit positions include: the taxpayer’s foreign stay is too short or too definite to support residence (despite physical presence abroad), the taxpayer’s family connections to the US undermine the foreign residence position, the taxpayer’s foreign tax filings (or absence thereof) don’t support the foreign residence claim, and the taxpayer’s intent regarding duration was for a definite short period rather than indefinite or extended.

The tax home and abode rules under Section 911(d)(3) provide an alternative IRS challenge route. The IRS can argue that the taxpayer’s abode is in the US (despite a foreign tax home) based on the totality of personal circumstances. Common abode challenges target taxpayers with rotating assignments (offshore work, periodic project rotations) where the taxpayer returns to the US between rotations and maintains substantial US connections during the rotations. The abode determination depends on family location, length of foreign stays versus US stays, social and economic connections, and the substantive center of personal life.

Foreign source income characterization issues arise when the taxpayer’s income includes US-source elements that don’t qualify for FEIE. Income for services performed in the US (during US business trips, during US visits, before the foreign assignment began, or after it ended) is US-source under Section 861 and doesn’t qualify regardless of FEIE eligibility. The IRS can examine the source allocation and require additional US-source income recognition. Taxpayers with multi-country work patterns face the most complex source allocation issues.

Inconsistent reporting across years invites audit. A taxpayer who claims FEIE in some years but not others, who switches between bona fide residence and physical presence, or who reports inconsistent foreign country information creates audit triggers. The IRS examines year-over-year consistency as part of its risk-based selection process. Taxpayers should maintain consistent reporting positions across years that align with the underlying facts.

Large exclusion amounts attract attention. Claims at or near the maximum FEIE amount ($132,900 for 2026) plus substantial housing exclusion can produce total exclusions of $160,000 to $200,000 or more, depending on the city. The dollar amount alone doesn’t trigger audit, but combined with other risk factors (complex foreign arrangements, large income, marginal facts), large claims have higher audit probability. Taxpayers should document the income source carefully when claiming substantial exclusions.

Foreign earned income calculation errors trigger audit adjustments. Common errors include claiming exclusion on passive income (interest, dividends, capital gains, rents from real property), claiming exclusion on US-source business income, double-counting income reported on both W-2 and Schedule C, and failing to apply the proper allocation when services were performed in multiple countries. The IRS examines the calculation methodology in audit and corrects errors that produce overstated exclusions.

Self-employment tax interaction triggers separate examination. The IRS examines whether self-employed expats properly applied SE tax to their foreign earnings (which doesn’t qualify for the FEIE exclusion from SE tax). Common errors include claiming totalization agreement protection without proper documentation, treating S-corp wages as not subject to SE tax (correct) versus K-1 distributions (also correct), and ignoring foreign social security as a credit against US SE tax (the credit is limited and complex).

Statute of limitations considerations. The standard three-year statute of limitations under Section 6501 applies to FEIE audits in most cases. The six-year statute applies if the taxpayer omits more than 25% of gross income. Fraud opens an unlimited statute. The taxpayer should retain documentation supporting FEIE claims for at least seven years to address normal statute periods plus reasonable margins. International information return failures (FBAR, Form 8938, Form 5471) have separate statute issues that can extend exposure substantially.

Where The Reed Corporation adds value. We prepare bona fide residence test expat FEIE claims with documentation that anticipates the audit risks discussed above, defend FEIE claims in IRS examination when our clients are audited, address related issues including SE tax, FBAR, Form 8938, and foreign tax credit, coordinate with foreign tax advisors on cross-border issues, prepare voluntary disclosure submissions when prior-year filings need correction (Streamlined Filing Procedures, OVDP, etc.), and integrate the audit defense with the client’s broader expat tax planning. The bona fide residence test expat audit defense is part of the integrated practice we offer expat clients. See our expat tax services for the integrated practice. The bona fide residence test expat audit defense increasingly involves coordination across multiple IRS units. The international examination function handles the core FEIE issues. The employment tax function handles SE tax issues. The information return penalties function handles FBAR and Form 8938 issues. The state-level audits run independently of the federal examination but often follow similar fact patterns. Coordinated audit defense across all these units requires understanding the procedural rules and timing of each function. We handle multi-unit audit coordination for expat clients with thorough cross-functional defense rather than treating each issue separately. The coordinated approach produces better outcomes and reduces total time-to-resolution across the various examinations. Audit risk also varies based on the taxpayer’s overall tax compliance pattern. A clean compliance history with timely filings, accurate reporting, and prompt response to any prior IRS correspondence reduces audit selection probability for a given FEIE claim. A history of late filings, amended returns, or unresolved prior issues increases the probability. We help expat clients build clean compliance histories that support favorable audit selection outcomes across multiple years of expat residence. The history-building work pays off when the IRS examines later-year returns because clean prior years produce better treatment in later examinations.

A bona fide residence test expat can lose qualification mid-year if her residential pattern changes in a way that terminates the bona fide foreign residence. The most common mid-year disqualification scenarios include returning to the US permanently, accepting US employment, moving family back to the US, abandoning the foreign residence, or making representations to foreign tax authorities that she’s not a foreign resident. The mid-year loss has specific consequences for the FEIE claim depending on the circumstances and timing.

Treatment when bona fide residence ends mid-year. Under Section 911(d)(2)(B), if the taxpayer’s bona fide foreign residence ends during the year (after having qualified for an earlier year), she can still claim partial-year FEIE for the portion of the year before residence ended. The exclusion amount is prorated for the partial year based on the number of qualifying days. For example, a taxpayer whose bona fide residence ends on June 30, 2025 (after qualifying for prior years), can claim partial FEIE for January 1 through June 30, 2025, with the maximum exclusion prorated to $130,000 times 181 days divided by 365 days, or approximately $64,470.

What constitutes ending bona fide residence. The bona fide residence ends when the taxpayer no longer satisfies the facts-and-circumstances test for residence in the foreign country. The ending date is determined by the actual facts: the date the taxpayer moved out of her foreign residence, the date she accepted US employment with intent to remain in the US, the date her family moved back to the US, or whichever event most clearly marks the abandonment of foreign residence. The taxpayer should document the specific date because the proration depends on it.

Short interruptions don’t end bona fide residence. A bona fide resident who returns to the US for a vacation, a business trip, a family event, or a temporary medical issue doesn’t lose residence as long as she returns to the foreign country with continuing intent to remain. The interruption test under Treas. Reg. Section 1.911-2 looks at whether the trip is consistent with continued foreign residence or whether it represents a substantive change in residence pattern. Short trips of weeks or even a few months can be consistent with continued residence depending on circumstances.

War, civil unrest, or adverse conditions exception. Under Section 911(d)(4), if the taxpayer leaves a foreign country during a period of war, civil unrest, or similar adverse conditions that the IRS has designated as preventing normal residence, the FEIE qualification can continue despite the early departure. The IRS maintains a list of qualifying adverse conditions and updates it periodically. The exception requires the foreign country to appear on the IRS list and the departure to be attributable to the adverse conditions. The provision provides relief for taxpayers caught up in unexpected geopolitical events.

Reestablishing bona fide residence after a break. A taxpayer who loses bona fide residence and later returns to foreign residence must reestablish the test from scratch. The new bona fide residence requires an entire tax year of foreign residence to qualify, just as the original residence did. The clock resets. The taxpayer cannot tack the prior bona fide residence onto the new one to satisfy the entire-tax-year requirement more quickly. The reset can be significant for taxpayers who interrupt their foreign residence pattern.

Transition to physical presence test. A taxpayer who loses bona fide residence mid-year may still be able to claim FEIE under the physical presence test for a 12-month period that captures the foreign work period. The physical presence test uses any 12-month period that produces 330 qualifying days, allowing flexibility in defining the qualifying window. If the taxpayer was physically outside the US for at least 330 days in any 12-month period that includes foreign work, she can claim FEIE under physical presence even though bona fide residence ended.

Self-employment income through year-end after bona fide residence ends. A self-employed expat whose bona fide residence ends mid-year continues to recognize self-employment income from the foreign work through the date of residence ending. Income earned after returning to the US is US-source and doesn’t qualify for FEIE regardless of bona fide residence timing. The source allocation for self-employed expats with mid-year residence changes requires careful tracking.

Practical example of mid-year residence loss. A US citizen consultant established bona fide residence in Singapore on January 1, 2023, and maintained residence through April 30, 2025, when she accepted a US position with start date May 1, 2025. Her bona fide residence ended April 30, 2025. She claims partial-year FEIE for January 1 through April 30, 2025, on her Singapore-source income earned during that period. The maximum exclusion is prorated to $130,000 times 120 days divided by 365 days, or approximately $42,740. Income from her US position starting May 1, 2025, is US-source and fully taxable without exclusion.

Where The Reed Corporation adds value. We handle mid-year bona fide residence test expat transitions including the partial-year FEIE calculation, the source allocation across foreign and US periods, the coordination with the physical presence test alternative when available, the state residency analysis on repatriation, the foreign tax credit positioning for foreign taxes paid during the qualifying period, and the integration with the client’s broader tax planning around the transition. The bona fide residence test expat transition planning is part of the integrated practice we offer expat clients. See our tax strategy consulting service for the integrated work. The repatriation year is often the year with the most complex tax issues, combining final-year foreign tax filings, mid-year FEIE claim, US re-entry residency analysis, state residency reestablishment, social security totalization wind-down, and FBAR and FATCA reporting on foreign accounts being closed. We coordinate all of these elements for clients in transition. The post-repatriation transition deserves separate attention beyond the partial-year mechanics. Returning expats face challenges including foreign retirement account treatment, FBAR and FATCA continuing reporting, foreign tax credit utilization, state residency reestablishment, US social security coordination with foreign systems, and similar items. The bona fide residence test expat period properly closes with documentation of the final qualifying date, the partial-year exclusion calculation, and the start of full US tax residency. We integrate the repatriation year planning with the full transition for our expat clients, recognizing that the return year often involves more complexity than any other expat year. The return year tax planning frequently captures meaningful one-time opportunities (Roth conversions during low US income windows, harvesting of certain foreign tax credits before they expire, careful timing of asset dispositions) that the integrated approach surfaces.