# FEIE 12 month period



## Jamie D (May 10, 2021)

Hello! FEIE question.

We were in Mexico on July 18th 2020. If, on July 17th, 2021 I have spent only 35 days in the U.S., do I qualify for this exemption from January 1st 2021 - July 17th, 2021? 

I want to leave Mexico at the exact date that I can still receive the exemption for part of the year. So I will spend 35 days in the U.S. in a one year period. 

Thank you!


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## Moulard (Feb 3, 2017)

Lets take a step back. 

There are two tests you must pass in order to take the FEIE. The tax home test and one of either the physical presence test or the bona fide residence test.

First test... Is your tax home in Mexico? If it is not, then you cannot use the FEIE.

Your tax home is your regular or principal place of business, employment, or post of duty, regardless of where you maintain your family residence. In some cases it can be where your regular place of abode (ie if you don't have a principal place of business). 

Assuming your tax home is Mexico, then you can proceed to the next test and can choose between the two other tests.

Assuming you are not a bona-fide resident then the only thing to bear in mind is that only FULL days count towards the 330 day physical presence test.

This means that days that you cross the border do not count towards the 330 day requirement.

From what you post, it is not clear whether or not you are a bona-fide resident of Mexico ( ie. you have lived in Mexico uninterrupted for an entire calendar year). For example all of 2020.

If yes, then the number of days spend in the US does not matter. All that matters is the number of days in the US working (as you cannot exclude US sourced income)


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## Jamie D (May 10, 2021)

Moulard said:


> Lets take a step back.
> 
> There are two tests you must pass in order to take the FEIE. The tax home test and one of either the physical presence test or the bona fide residence test.
> 
> ...


OK Thank you! What do you mean by "tax home"? I do not pay taxes in Mexico. I am a freelancer in Mexico. I am paid mostly by a business based in Florida. I am physically in Mexico, working online. I don't pay Mexico any taxes, I only pay taxes in the U.S.

I am not a bona-fide resident of Mexico.

If I pass the "tax home" requirement and I spend 330 days in Mexico from July 2020 to July 2021, can I claim the FEIE for the days spent in Mexico until July 2021?

Thank you for your help. This is so confusing. I reached out to a CPA but cannot get a response and am trying to plan my summer. 

-Jamie


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## Nononymous (Jul 12, 2011)

Others will be along to answer in more detail. 

Until then, one important point: you might want to reconsider the idea that you can live permanently in Mexico without ever paying any tax there.


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## Jamie D (May 10, 2021)

Nononymous said:


> Others will be along to answer in more detail.
> 
> Until then, one important point: you might want to reconsider the idea that you can live permanently in Mexico without ever paying any tax there.


We are currently tourists. We leave every 6 months. We are looking for our "home" - and have traveled to Costa Rica this year. We will eventually buy a house and settle but not yet. It is not our plan to dodge taxes in other countries.


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## Nononymous (Jul 12, 2011)

Jamie D said:


> We are currently tourists. We leave every 6 months. We are looking for our "home" - and have traveled to Costa Rica this year. We will eventually buy a house and settle but not yet. It is not our plan to dodge taxes in other countries.


As long as you're aware that the tax-free digital nomad thing requires a fair amount of mobility (and lack of attention from the local authorities) then you're good. Not sure if it was here or not but I do recall a question from someone who'd spent the better part of ten years in Mexico and claimed they were still "tourists" because they made brief trips back to the US every six months. Needless to say that wasn't kosher.


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## Bevdeforges (Nov 16, 2007)

Jamie D said:


> I do not pay taxes in Mexico. I am a freelancer in Mexico. I am paid mostly by a business based in Florida. I am physically in Mexico, working online. I don't pay Mexico any taxes, I only pay taxes in the U.S.


One other factor to consider is that the accepted international standard has always been that the country you are physically in while doing the work you're paid for is considered to be where you are working. Where your customers are located has no relevance. 

Don't know anything of the tax laws of Mexico, but there is a huge case to be made that you are indeed working in Mexico and probably subject to Mexico's tax (and labor) laws, no matter how often you leave the country. But, that's between you and the Mexican tax authority. For US tax purposes, you can always try and claim the FEIE but if you get rejected, you main recourse would be to fall back on the FTC, which does you no good if you're not paying income taxes in Mexico.


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## Jamie D (May 10, 2021)

Bevdeforges said:


> One other factor to consider is that the accepted international standard has always been that the country you are physically in while doing the work you're paid for is considered to be where you are working. Where your customers are located has no relevance.
> 
> Don't know anything of the tax laws of Mexico, but there is a huge case to be made that you are indeed working in Mexico and probably subject to Mexico's tax (and labor) laws, no matter how often you leave the country. But, that's between you and the Mexican tax authority. For US tax purposes, you can always try and claim the FEIE but if you get rejected, you main recourse would be to fall back on the FTC, which does you no good if you're not paying income taxes in Mexico.


Thank you. So it seems like I qualify for "tax home."

Am I correct that if I have been out of the country for 12 months from July, 2020 to July 2021 that I can claim for January 2021 - July 2021? It doesn't have to be one calendar year (January 2021 - December 2021)?


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## Bevdeforges (Nov 16, 2007)

Right - the criteria is 12 consecutive months. However, you can't file a return to take the FEIE until you have met the 12 consecutive months outside the US requirement. So basically, you file for an extension to file your 2020 return until August or September 2021 and then file your 2020 return, taking the apportioned FEIE on the period you spent working in Mexico. You would take the January to July 2021 FEIE on your 2021 return - depending on whether you return to the US during 2021 or not. But technically speaking, you should be filing taxes in Mexico for the time you are working there.


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## Jamie D (May 10, 2021)

Bevdeforges said:


> Right - the criteria is 12 consecutive months. However, you can't file a return to take the FEIE until you have met the 12 consecutive months outside the US requirement. So basically, you file for an extension to file your 2020 return until August or September 2021 and then file your 2020 return, taking the apportioned FEIE on the period you spent working in Mexico. You would take the January to July 2021 FEIE on your 2021 return - depending on whether you return to the US during 2021 or not. But technically speaking, you should be filing taxes in Mexico for the time you are working there.


Ok, thank you.

So a "tax home" means that I am not in the U.S. and I should be filing taxes wherever I am, although the U.S. doesn't get involved with that process... is that correct?

I am getting mixed information about whether or not I qualify for FEIE, but it seems like I do if I am working for a U.S. country and I have spent less than 35 days in the U.S. for 12 months.


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## Jamie D (May 10, 2021)

Bevdeforges said:


> Right - the criteria is 12 consecutive months. However, you can't file a return to take the FEIE until you have met the 12 consecutive months outside the US requirement. So basically, you file for an extension to file your 2020 return until August or September 2021 and then file your 2020 return, taking the apportioned FEIE on the period you spent working in Mexico. You would take the January to July 2021 FEIE on your 2021 return - depending on whether you return to the US during 2021 or not. But technically speaking, you should be filing taxes in Mexico for the time you are working there.


If I file an extension and use the FEIE for a partial year in 2020 and then spend less than 35 days in the U.S. for all of 2021, can I claim all of 2021 with the FEIE (other than the days in the U.S.)?


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## Bevdeforges (Nov 16, 2007)

Jamie D said:


> If I file an extension and use the FEIE for a partial year in 2020 and then spend less than 35 days in the U.S. for all of 2021, can I claim all of 2021 with the FEIE (other than the days in the U.S.)?


Yes. Basically, when you use the FEIE for a partial year your year of departure, you're qualifying based on the Physical Presence test (12 consecutive months of living outside the US) for that initial period. The bona fide residence test requires an entire calendar year spent outside the US. So it's entirely possible to take the FEIE for that part year based on physical presence, and then the following year to use bona fide residence (assuming you meet the other requirements for that).

Take a look at IRS Publication 54 for more information on all of that.


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