United States taxpayers living overseas are usually somewhat familiar with the benefits of the foreign earned income exclusion, the foreign housing exclusion, or the foreign housing deduction. Often I see many misconceptions with regard to the rules. Here is one of the most common. Not understanding the concept can mean losing the benefits that might otherwise be possible.

In order to qualify for any of the benefits, the taxpayer is required to have (among other things) a “tax home” in a foreign country. In defining what is meant by a “tax home” the law provides that the taxpayer shall not be treated as having a “tax home” in a foreign country “for any period for which his abode is within the United States.” What is the difference between one’s “tax home” and one’s “abode”?

What is a “Tax Home?”

Under the tax rules, one’s tax home” is defined generally as the main place of business, employment, or post of duty, regardless of where the individual maintains his family home. The tax home test focuses on the place of one’s vocation or employment. It is the place where you are permanently or indefinitely engaged to work as an employee or self-employed individual. If you do not have a regular or main place of business because of the nature of your work, your tax home may be the place where you regularly live. If you do not have either a regular or main place of business or a place where you regularly live, you are considered an “itinerant”. In that case, your tax home is wherever you work.

What is an “Abode”?

As mentioned, you are not considered to have a tax home in a foreign country for any period in which your abode is Read More