Counting 330 Days: How the Physical Presence Test Works, Which 12 Months to Pick, and the Travel Days That Don't Count

Short version: Foreign Earned Income Exclusion Explained: Form 2555

The physical presence test is arithmetic, and Americans in Canada who use the exclusion fail it by miscounting rather than by living in the wrong place. The rule: a US citizen or resident alien with a tax home in a foreign country who is physically present in a foreign country or countries for at least 330 full days during any period of 12 consecutive months meets the test for that period, and may claim the foreign earned income exclusion for foreign earned income attributable to it — with the exclusion prorated where the qualifying 12-month period covers only part of the tax year. Counting the days: a full day is a 24-hour period beginning at midnight, spent entirely in a foreign country — a day on which the taxpayer is in the United States for any part (an afternoon in Buffalo, a layover in Chicago, a midnight crossing) is not a full foreign day; a day spent in international airspace or waters in transit between foreign countries counts as a foreign day only if the transit takes less than 24 hours; a day of travel from the US to Canada is not a full foreign day (part of it was in the US); a day of travel from Canada to the US is not either; and a day in Canada is a foreign day whether working, vacationing, or ill — the test counts presence, not activity. The 330 days need not be consecutive and need not be workdays; the 35 days of slack (365 less 330) are the allowance for US visits within the window, and a family that spends Christmas and a summer week in the US uses about 20 of them, leaving 15 for everything else — the cross-border commuter, the frequent business traveler, and the snowbird's adult children who visit often are the populations that fail. Choosing the window: the 12 consecutive months can begin on any day — not necessarily January 1 — and the taxpayer chooses the window that maximizes the qualifying days; for a full-year Canadian resident, the calendar year works and the exclusion is unprorated; for a move year (arrived in Canada in June), the window runs June to June, the test is met over that window, and the exclusion for the tax year is prorated to the days of the tax year within the qualifying window (June through December — roughly 58% of the year's exclusion limit); for a taxpayer with a heavy US travel year, a window straddling two tax years can isolate the qualifying stretch, with each year's exclusion prorated to its share of the window. The tax home requirement runs alongside: the taxpayer's tax home — the regular or principal place of business — must be in a foreign country for the period, and a taxpayer whose abode remains in the United States (family, home, economic life anchored there) fails the tax-home test regardless of days — the reason the physical presence test alone doesn't qualify a US-based worker on a long foreign project. The waiver: where war, civil unrest, or similar adverse conditions in the foreign country forced the taxpayer to leave before meeting the test, the IRS publishes waivers of the minimum-time requirement for specific countries and periods — irrelevant to Canada in practice. The bona fide residence test is the other door: a US citizen who is a bona fide resident of a foreign country for an uninterrupted period including a full tax year meets it regardless of days — a facts-and-circumstances test (intention, ties, the length and nature of the stay) that the established American in Canada usually meets, that allows unlimited US visits, and that the move-year taxpayer cannot meet until a full tax year has passed (the physical presence test is the move year's door; the bona fide residence test takes over from the first full year). When the test is the wrong door anyway: the exclusion itself is usually the wrong tool in Canada — the credit-versus-exclusion guides explain that the foreign tax credit zeros the same US tax while preserving the refundable child tax credit and the credit carryforwards, so the American in Canada who has carefully counted 330 days may be counting toward a form choice they shouldn't make; the physical presence test matters most for the move-year taxpayer choosing between a prorated exclusion and the credit (the credit usually wins), for the taxpayer in a low-tax foreign country (not Canada), and for the rare Canadian-resident American whose income is exempt from Canadian tax (a treaty-exempt category) and who therefore has no Canadian tax to credit. The record that supports it: a travel log with every border crossing (entry and exit dates), the passport stamps and the border agency's travel history (the US CBP I-94 travel history and Canada's border records are retrievable), and the tax-home facts — because the test is examined by counting, and the taxpayer who reconstructs a year of crossings from memory is the one who finds day 331 was a Tuesday in Detroit.

Key takeaways

• 330 full foreign days in any 12 consecutive months: a full day is midnight to midnight entirely outside the US; any part of a day in the US disqualifies that day; the 35-day slack absorbs visits home.
• The window is yours to choose: any 12 consecutive months, straddling tax years if useful; the move year qualifies through a window starting at arrival with the exclusion prorated to the tax year's share.
• Tax home must be foreign too: an abode anchored in the US fails the test regardless of days.
• Travel days don't count on either end; transit between foreign countries counts only under 24 hours; the frequent US traveler and the commuter fail on arithmetic.
• The bona fide residence test takes over after the first full year: unlimited US visits, facts-and-circumstances — the established American in Canada's door; the physical presence test is the move year's.
• Count carefully, then ask whether the exclusion is the right tool: in Canada the credit usually wins, and the physical presence test matters mostly for the move year, low-tax countries, and treaty-exempt income.

The day-count worksheet

A row per border crossing: date out of the US, date back into the US, full foreign days in between (exclusive of both travel days). Sum the full foreign days over candidate 12-month windows (calendar year; arrival-anchored; any window that isolates a heavy-travel stretch). The window with 330 or more qualifies; the exclusion is prorated to the tax year's days within it. Confirm the tax home. Then run the credit-versus-exclusion comparison — because the worksheet's answer is a qualification, not a recommendation, and for most Americans in Canada the recommendation is the credit.

Worked example

A software developer moves from Portland to Vancouver on May 20, works from Vancouver, and visits Portland for Thanksgiving (5 days), Christmas (9 days), and two long weekends (3 days each). Calendar-year window: he arrived May 20, so January through May 19 are US days — the calendar year fails. Arrival-anchored window (May 20 to May 19 of the next year): 365 days less 20 US visit days less the travel days on each end of each trip (8 trips × 2 travel days = 16) = 329 full foreign days — one short. The fix, run before year-end: one long weekend is cancelled, restoring 5 days (3 visit days plus 2 travel days) — 334 full foreign days, the test met for the window, and the exclusion prorated to May 20 through December 31 (about 62% of the annual limit). Then the comparison: his Vancouver salary is taxed by BC at rates that exceed the US tax on it — the foreign tax credit zeros the US tax on the full year's Canadian salary with credits to spare, while the prorated exclusion shelters only 62% of the limit and forfeits the credit carryforward; he claims the credit, and the 330-day count he agonized over becomes a note in the file. His colleague, who arrived the same month but whose spouse and house stayed in Portland: 340 full foreign days, the physical presence test met — and the tax-home test failed, because his abode remained in the US; no exclusion, and the credit (which has no abode test) was his only door anyway.

Official sources

The IRS explains: "You meet the physical presence test if you are physically present in a foreign country or countries 330 full days during any period of 12 consecutive months." "A 12-month period can begin with any day of the month." "A full day is a period of 24 consecutive hours, beginning and ending at midnight." — Internal Revenue Service, Foreign earned income exclusion — physical presence test, https://www.irs.gov/individuals/international-taxpayers/foreign-earned-income-exclusion-physical-presence-test

The IRS explains that a qualifying taxpayer "may qualify to exclude your foreign earnings from income up to an amount that is adjusted annually for inflation," and that to qualify "your tax home must be in a foreign country." — Internal Revenue Service, Foreign Earned Income Exclusion, https://www.irs.gov/individuals/international-taxpayers/foreign-earned-income-exclusion

Practitioner note

The physical presence test is arithmetic that Americans in Canada get wrong by a day or two and then discover didn't matter, because the foreign tax credit was the better door regardless. Our day-count worksheet counts every crossing with travel days excluded on both ends, picks the window that qualifies, and prorates the move year — then runs the credit comparison that usually retires the whole exercise, except for the move-year, low-tax-country, and treaty-exempt cases where the test actually decides something.

See also: For how to put US income on a Canadian T1, see how to put US income on a Canadian T1; and browse every cross-border tax topic guide, organized by situation.

Next step

Fairlight prepares the exclusion qualification review — the border-crossing day-count worksheet with window selection and proration, the tax-home analysis, the bona fide residence transition after the first full year, and the credit-versus-exclusion comparison that decides the form. See cross-border pricing or book a call.