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In order to qualify for certain deductions, expats must pass the Bona Fide Residence Test to determine whether they have truly set up residence in their overseas home. Your preparer will use this test to determine whether you are eligible for the Foreign Earned Income Exclusion. Living overseas does not necessarily mean that you qualify for expatriate status with the IRS. The requirements for every deduction and exclusion should be carefully reviewed, and expats should never simply assume that they qualify.
In order to claim the deductions and exclusions available to expatriates, you must meet each of these four requirements.
The requirements of the Bona Fide Resident Test are basically straightforward, except for the last point mentioned. Whether an expat has plans to return to the US can be difficult to determine. The following examples are intended to clarify this point.
Whether or not you qualify as a Bona Fide Resident will dramatically affect your taxes as a US expat. The credits and exclusions that coincide with this label can save you thousands of dollars. It's important, especially as an expat, to have an expert prepare your taxes as the Bona Fide Resident Test is not simply cut and dry. The IRS handles each of these cases as they come. If you've moved overseas and are not entirely sure when or if you will return to the US, you will most likely qualify as a Bona Fide Resident after your first full year abroad. To be sure, though, and to be sure that the relevant form (2555) has been completed correctly, it is wise to seek the assistance of an international tax expert.