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Tax Law (Questions About Taxes)/Afordable Care Act Tax Exemption Overseas Living


Mr. Brody, I really need help. Please! Thank you so very much in advance. I originally thought my daughter, who is TEMPORARILY teaching in China would be exempt from the Obamacare tax for 2014 because she lived overseas for over 330 days during a period of 12 consecutive months, and therefore qualified for an Obamacare tax exemption by passing the IRS's physical presence test. But if I'm correct on my new analysis, the physical presence test is more than at least 330 days/365, and to avoid the tax you need to qualify EXACTLY as you would to claim foreign income exclusion - which she doesn't. Lately I've learned that although according to 26 U.S. Code 911/Internal Revenue Code 911(d)(1)(B) my daughter DOES have a tax home outside the U.S., she still does NOT have minimum essential coverage to avoid the Obamacare tax for her over 330 days/365, because IRS publication 54 says you CAN'T have a tax home outside the U.S. if your abode (which the IRS says is considered a domestic issue, not vocational) is in the U.S. I believe my daughter's abode IS in the U.S. for my daughter's just TEMPORARILY teaching in China, has NO plans to stay in China after teaching, has her domestic ties in the U.S.(family, banking, etc.), is a resident of California and in her “heart of hearts” is domestically linked to the U.S. I believe now because of the aforementioned reference to abode in conjunction to tax home, my daughter DOES NOT qualify for an Obamacare exemption and needs to pay the tax. Please advise.

Hi Shone, in order to qualify for the living abroad exemption, please see the following in the Form 8965 instructions (

You can claim a coverage exemption for yourself or another member of your tax household to which any of the following apply. The individual is a U.S. citizen or resident who is physically present in a foreign country (or countries) for at least 330 full days within a 12-month period. You can claim the coverage exemption for any month during your tax year that is included in the 12-month period. For more information, see Physical Presence Test in Pub. 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad.

So, as long as she meets the qualification for the physical presence test for the foreign earned income exclusion, an exemption would apply for any month included in the 12-month qualifying period for the test.

To claim the foreign earned income exclusion, she must meet all three of the following requirements.

(1) Your tax home must be in a foreign country.

(2) You must have foreign earned income.

(3) A U.S. citizen or a U.S. resident alien who is physically present in a foreign country or countries for at least 330 full days during any period of 12 consecutive months.


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Randall Brody, EA, MBA, CCP


Tax Samaritan is a boutique firm specializing in the preparation of taxes and the resolution of tax problems for Americans living abroad, as well as the unique tax issues that apply to taxpayers that are gamblers, teachers, nurses and military.


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