# Qualify as Bonafide resident



## Jamie D (May 10, 2021)

I am considering applying for residency in Costa Rica. There are two options for this (rentista and investor) but once approved I would be a temporary resident for three years. After three years as a temporary resident I can apply to be a permanent resident. As an "official" temporary resident, would I qualify, after a year, for FEIE under "bonafide resident"?

Thank you!


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## rohano (Jul 11, 2021)

Jamie D said:


> I am considering applying for residency in Costa Rica. There are two options for this (rentista and investor) but once approved I would be a temporary resident for three years. After three years as a temporary resident I can apply to be a permanent resident. As an "official" temporary resident, would I qualify, after a year, for FEIE under "bonafide resident"?
> 
> Thank you!


We _applied_ for _residency_ in _May_ 2016, _but_ have updated this ... We won't _go_ into detail about all the _options_ here, _but there_ are three types that most people _consider_. ... These types _of residency_, _if_ granted, require that you be a _temporary resident_ for _three years_ before you _can apply_ for _permanent residency_.


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## Bevdeforges (Nov 16, 2007)

The usual approach is to file using the physical presence test for the first year you are living overseas. There is an example of how this works in Publication 54, but the general idea is that for the physical presence test, you must be outside the US for at least 330 days in a period of 12 consecutive months. For the bona fide resident test, you must have lived outside the US for an entire calendar year.

Let's say the first year you move to Costa Rica, you move in June. To use the physical presence test, you won't be able to file your tax returns until you have fulfilled the physical presence test (i.e. in July of the following year) - but you will still be able to take the FEIE for earned income for the period from your arrival to Dec. 31st of that year. The next year, you may be able to take the FEIE based on the bona fide resident test - as it is your intention that counts, not the technical designation of your residence status.

See Pub 54 - there is usually an example of how this first year use of the physical presence thing works.


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## Jamie D (May 10, 2021)

Thank you! I am familiar with the physical presence test but would like to spend about 2 months in the U.S. per year so I am trying to find another way. Does the bona fide resident test mean you haven't been in the U.S. for the whole year OR that you are a resident? I thought it was dependent on residency and I am wondering if the temporary resident would qualify me or if I have to wait until I am a permanent resident to qualify under bona fide. 

I was under the impression that as a bona fide resident you can apply for FEIE and be in the U.S. for up to 6 months in the year.


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## Bevdeforges (Nov 16, 2007)

The bona fide resident test doesn't seem to depend on that 330 days thing. But I would be very careful about spending up to six months of a calendar year in the US. If you are in the US doing business there for up to 6 months a year, then you still have to allocate your earned income between your country of residence and the US based on your presence in each country.


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## Moulard (Feb 3, 2017)

Jamie D said:


> Does the bona fide resident test mean you haven't been in the U.S. for the whole year OR that you are a resident?


Both..

To be eligible for the Bona Fide Residents test you must be one of either...



> A U.S. citizen who is a bona fide resident of a foreign country, or countries, for an *uninterrupted period *that includes an entire tax year (January 1–December 31, if you file a calendar year return).


or


> A U.S. resident alien who is a citizen or national of a country with which the United States has an income tax treaty in effect and who is a bona fide resident of a foreign country, or countries, for an *uninterrupted period *that includes an entire tax year (January 1–December 31, if you file a calendar year return).


If you are planning on spending time in the US every year you will never meet the *uninterrupted *part of either test and thus never qualify for the Bona Fide Resident test because you will not have been out of the US for an entire calendar year.



Jamie D said:


> I was under the impression that as a bona fide resident you can apply for FEIE and be in the U.S. for up to 6 months in the year.


That "rule" really only applies to those who live in a country with a tax treaty with the US - there are tiebreaker rules in treaties used when both countries claim a person as a tax resident. Some (but not all) treaties have a 183 day presence rule that can come into play (that is where the 6 month concept comes into play). This is moot in your case as there is no tax treaty in force.

As to the residence part of your question... it depends. 

On its own, visa status is only part of the mix in determining whether or not you are a bona fide resident.

So long as you have no plans to return to the US (other than for brief trips etc) and have every intention of staying in Costa Rica for an extended period of time, you could well be a bona fide resident while living there on a temporary visa Obviously a temporary visa is weaker from the perspective of the preponderance of evidence but that shouldn't matter if the temporary visa is a mandatory step towards permanent residence visa.

As for future trips to the US (whether they be personal or business) to keep your status as a bona fide resident of a foreign country, you must have a clear intention of returning from such trips, without unreasonable delay.

But of course all that is moot until you spend an entire year in Costa Rica.


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## Bevdeforges (Nov 16, 2007)

Moulard said:


> That "rule" really only applies to those who live in a country with a tax treaty with the US - there are tiebreaker rules in treaties used when both countries claim a person as a tax resident.


Treaty or no treaty, there is also the US stance that says that US citizens are ALWAYS considered tax resident in the US, no matter where in the world they live. I suspect the tie-breaker rule applies primarily to determining whether or not the taxpayer can claim "residence" in their adopted country under the terms of the tax treaty. (Residence being necessary to claim certain types of benefits of the treaty.)


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## Jamie D (May 10, 2021)

Sorry - I didn't see the responses above and can't cancel this post. Thank you for the help!


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