You Make the Call - March 5, 2026

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Question: John and Maria Rivera are married U.S. citizens. In January 2025, John accepted a three-year work assignment in Germany, a foreign country that has a tax treaty with the United States. They sold their home in Texas, stored most of their belongings and leased an apartment in Germany. Maria initially traveled with John but returned to the U.S. in March 2025 to work remotely for a U.S. employer.

John is an executive with a company located in Austin, Texas. John worked for the company for 7 years and in January of last year, was transferred to Munich, Germany, for a minimum of 36 months to set up the Munich location. Before John left for Munich, he had new business cards printed that showed his business and home addresses in Munich. Shortly after arriving in Munich, John and his wife opened bank accounts. German driver’s licenses were obtained, and a car was leased. 

In 2025, John spent 335 days in Germany and 30 days in the U.S. Maria spent 200 days in the U.S. and 165 days in Germany.

How should John and Maria be treated for U.S. tax purposes in 2025 regarding U.S. residency status and eligibility for the foreign earned income exclusion (FEIE)?

Answer: John Rivera is a U.S. citizen and therefore a U.S. tax resident. He qualifies for the FEIE because he satisfies both the physical presence and tax home requirements. Under the physical presence test, he was present in Germany for at least 330 full days during the applicable 12-month period [Reg. §1.911-2(d)]. In addition, he established a foreign tax home in 2025 after selling his residence in Texas and relocating abroad (§911). His three-year assignment is considered indefinite rather than temporary (i.e., not expected to last one year or less), which further supports the conclusion that his tax home shifted to Germany. Accordingly, because he meets both the physical presence test and the foreign tax home requirement, he is eligible to claim the FEIE.

Maria Rivera is also a U.S. tax resident by citizenship but does not qualify for the FEIE because she was not physically present in Germany for at least 330 days in 2025.

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