Hurricanes have rocked the U.S. this year with Harvey, Irma, and Maria causing substantial damage to Texas, Florida, Puerto Rico and more. However, the damage faced in the continental U.S. isn’t close to what Puerto Rico experienced after being hit by both Hurricane Irma and Maria.
Disaster relief efforts are still in effect and many residents of the U.S. territories of Puerto Rico and the Virgin Islands who evacuated still can’t return due to the catastrophic damage. Many don’t even have homes to return to anymore. The IRS has recognized this and provided a major tax break as a result.
The IRS Extends The 14-Day Absence Period
Typically during a declared disaster under residency tax rules residents are allowed a 14-day absence period under the 183-day general presence test. However, the IRS has extended the 14-day period to 117 days, starting on September 6, 2017 and ending on December 31, 2017.
Anyone who is absent in the U.S. Puerto Rico and Virgin Island territories during this 117 day period will be treated as either having the inability to return or leaving due to hurricanes Irma and Maria. This issues relief to many citizens as they will not lose their status as a ‘bona fide resident’ for tax filing and reporting purposes.
When living in a foreign country or territory like Puerto Rico you can qualify for foreign earned income exclusion by being a bona fide resident. To become a bona fide resident you have to pass the bona fide residency test.
Part of passing this test involves residing in that country for an entire tax year, from January 1 through December 31. Also, you can not have a tax home outside of the relevant possession and you can not have a closer connection to the United States or to a foreign country than the relevant position.
Most importantly, you will have to meet the presence test. As a U.S. citizen or resident alien to pass the presence test in Puerto Rico or the Virgin islands you must meet one of the following conditions:
- You must be present for at least 183 days during the tax year.
- You were not present in the United States for more than 90 days during the tax year.
- You had no significant connection to the United States During the tax year.
- You were present for at least 549 days during a 3-year period in the relevant possession. This includes the current tax year and 2 immediately preceding tax years. Also, during each of the 3 years, you must be present in the relevant possession for at least 60 days.
- You didn’t earn more than $3,000 in income in the United States and were present in the relevant possession for more days than the United States during the tax year.
By extending this declared disaster period from 14 to 117 days, residents who had to evacuate and can’t return home yet now have more time to resolve their situation. Being away during this period will not hurt their physical presence test or bona fide resident status.
How To Help
The U.S. territories of Puerto Rico and the Virgin Islands still need our help after getting hit by two major hurricanes. You can help spread the word on social media to raise awareness for the cause. Many people are unaware of the catastrophic damage that occurred, and spreading awareness could increase donations.
You could also donate money to a hurricane relief organization or charity. When donating food, water, and clothes make sure that your source has enough funds to transport the materials to the affected areas. Also, you could head to the disaster areas yourself to volunteer.
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