In general, these are individuals who qualify for a foreign earned income exclusion under section 911 of the Internal Revenue Code. Individuals may qualify for this rule even if they cannot use the exclusion for all of their foreign earned income because, for example, they are employees of the United States. Individuals that qualify for this rule will not need to take any further action to comply with the individual mandate during the months when they qualify. See Pub. 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad, for information on the foreign earned income exclusion.
U.S. citizens who meet neither the physical presence nor residency requirements will need to maintain minimum essential coverage, qualify for an exemption or pay a penalty for each month of the year. One exemption that may be particularly relevant to U.S. citizens living abroad for a small part of a year is the exemption for a short coverage gap, which provides that no penalty will be due for a once-per-year gap in coverage that lasts less than three months.
