Foreign Earned Income Tax Exclusion Physical Presence Test while on Ocean Crossings

[unlimited]

Hi all,

In the US, the FEIE allows you to deduct ~$100k from W2 income. One of the ways to meet this is through the Physical Presence Test, which:

"You must be physically present in a foreign country or countries for at least 330 full days during a 12-month period including some part of the year at issue. You can count days you spent abroad for any reason, so long as your tax home is in a foreign country."

Source

I have been out of the US for almost a year and I'd like to do some sailing/cruising. It appears that the time spent over international waters, ie, doing a 2 week ocean crossing, doesn't count towards as being in a foreign country:

Travel. When you leave the United States to go directly to a foreign country or when you return directly to the United States from a foreign country, the time you spend on or over international waters doesn’t count toward the 330-day total.

Source

However, crew members who are employed on foreign flagged vessels are counted as being in a foreign country: https://marineaccounts.com/the-intel...er#Regulations


So if I'm on a foreign flagged vessel as a passenger or recreational crew (unpaid) to get from point A to point B, am I considered (or not) to be in a foreign country?

[Shrew]

Originally Posted by unlimited

Source

However, crew members who are employed on foreign flagged vessels are counted as being in a foreign country: https://marineaccounts.com/the-intel...er#Regulations


So if I'm on a foreign flagged vessel as a passenger or recreational crew (unpaid) to get from point A to point B, am I considered (or not) to be in a foreign country?

A passenger is not an employee. I doubt recreational crew would stand-up to definition of employee either, since neither are collecting a wage.

You're attempting to deduct earned income using activities that didn't generate that income. I'm not sure why you're banging head over this. It's fairly clearly written.

[unlimited]

Originally Posted by Shrew

A passenger is not an employee. I doubt recreational crew would stand-up to definition of employee either, since neither are collecting a wage.

You're attempting to deduct earned income using activities that didn't generate that income. I'm not sure why you're banging head over this. It's fairly clearly written.

It's not quite clear to me. I had a land-based job and I was working remotely for the majority of the year. I'd like to continue to fulfill the 330 days of being in a foreign country. But if I were to sail/cruise around (no income period), according to you it would not count towards the 330 days of being overseas. It should tho, if I am on a foreign flagged vessel, as being on the vessel means I'm subject to the laws and regulations of that vessel's flag state, no matter whether I'm a passenger or paid crew - i think...right?!

[GreenWave]

Nope. Unless you are employed and paid a wage you aren’t a foreign anything.

[sailasia]

100% the time spent traveling between the US and another country is counted as "being in the US".

Plane or boat.

[Stu Jackson]

Originally Posted by sailasia

100% the time spent traveling between the US and another country is counted as "being in the US".

Plane or boat.

I'd be interested to learn where this is written in the IRS Rules.


Just kidding, but don't charts have demarcation lines on them between countries? There is one on both my US and Canadian charts running right through the middle of the Strait of Juan de Fuca!

[unlimited]

Originally Posted by GreenWave

Nope. Unless you are employed and paid a wage you aren’t a foreign anything.

Um no, I don't think the IRS looks at what periods you are employed and what periods you have no income. It clearly states that you have to be out of the US 330 days of the year. But does this constitute being on a foreign flagged vessel in international waters? That's my question.

[GreenWave]

Originally Posted by unlimited

Um no, I don't think the IRS looks at what periods you are employed and what periods you have no income. It clearly states that you have to be out of the US 330 days of the year. But does this constitute being on a foreign flagged vessel in international waters? That's my question.

My point here is that you have to have Foreign Earned Income. So does your income qualify for this- that is the question. Are you paid while in another country? Are you paid by a foreign company? And then do you pass the location test? Just cruising around outside the US while NOT earning income won't count towards the 330 days, IMO.

[Shrew]

Originally Posted by unlimited

It's not quite clear to me. I had a land-based job and I was working remotely for the majority of the year. I'd like to continue to fulfill the 330 days of being in a foreign country. But if I were to sail/cruise around (no income period), according to you it would not count towards the 330 days of being overseas. It should tho, if I am on a foreign flagged vessel, as being on the vessel means I'm subject to the laws and regulations of that vessel's flag state, no matter whether I'm a passenger or paid crew - i think...right?!

Where is the origin of the salary coming from? Is a US based job from a US based company??

The idea of the FEITE is for money earned working for a foreign company in a foreign country.

What it sounds like you're proposing is to collect a salary from a US based company for a US job, then deduct under the FEITE for time spent travelling recreationally.

It doesn't work that way.