Articles · Basics · International Tax and Global Mobility
Resident or Nonresident? The Substantial Presence Test
A foreign national's U.S. tax depends on residency. Residents are generally taxed on worldwide income, while nonresidents are generally taxed only on U.S.-source and connected income.
Two main tests
Under Section 7701(b), a person holding a green card is a resident. Otherwise, the person is a resident if they meet the substantial presence test.
That test requires at least 31 days in the U.S. in the current year, and a weighted total of at least 183 days. The total counts all days this year, one-third of days last year, and one-sixth of days two years ago.
An example
Someone present 120 days this year, 120 days last year, and 120 days the year before has 120 + 40 + 20 = 180 weighted days. They fall short of 183, so they do not meet the test. Just four more days this year would change the result, because the total would reach 184.
Exceptions and filing
Certain people do not count days, including many students, teachers, and trainees. A closer connection to a foreign country can help, using Form 8840, and a treaty tie-breaker may apply.
Residents file Form 1040 and nonresidents file Form 1040-NR. In an arrival or departure year, a person may be dual-status and follow special rules.
Counting days correctly
Generally, any part of a day in the U.S. counts as a full day. Some days do not count, including days commuting from Canada or Mexico, days in transit for less than 24 hours, days a person cannot leave because of a medical condition that arose in the U.S., and days as an exempt individual.
Keep travel records. Passport stamps can be incomplete, while airline records and the I-94 travel history can help prove the count.
Exempt individuals
Students on F, J, M, or Q visas generally do not count days for five calendar years. Teachers and trainees on J or Q visas generally do not count days for two of the last six calendar years. Foreign government-related individuals are also exempt.
Exempt individuals usually file Form 8843 to explain why days were excluded. Compliance with visa terms is required for the exemption to apply. An H-1B worker, by contrast, counts every day, and usually becomes a resident quickly.
When residency starts and ends
A person who meets the test is generally a resident from the first day present in that year. Up to ten days can be ignored for this purpose if the person had a closer connection to a foreign country. Residency generally ends on December 31, unless the person leaves with a closer connection abroad and meets related conditions, in which case it may end on the last day present.
This creates dual-status years. Dual-status filers are residents for part of the year and nonresidents for the rest. They generally cannot use the standard deduction, or file jointly, without an election.
Elections that change the result
A first-year choice can let some people be treated as residents earlier than the test would allow. A nonresident married to a citizen or resident can elect with their spouse under Section 6013(g) to be taxed as a resident for the full year. That allows joint filing, but brings worldwide income into U.S. tax.
The closer connection exception requires fewer than 183 days in the current year, a tax home abroad, and a filing of Form 8840. Treaty tie-breaker rules can also treat someone as a nonresident, usually requiring Form 8833. Green card holders should take care, because a tie-breaker claim can affect immigration status.
Why the answer matters
Residents report worldwide income, and may owe FBAR, Form 8938, and foreign entity reporting. Nonresidents generally report U.S.-source income and income effectively connected with a U.S. business. Nonresidents usually cannot claim many credits, and may use a W-8BEN to claim treaty benefits on certain income.
State residency follows its own rules, so a person can be a nonresident federally and a resident of a state, or the other way round.
Key takeaways
- Use the 31-day and 183-day weighted tests.
- Exempt individuals do not count certain days.
- Treaties can override residency in some cases.
Frequently asked questions
Does a day of arrival count?
Yes, in general. Any part of a day in the U.S. counts, unless a specific exception applies.
Do I need to file if I was only here for a few months?
Possibly. Nonresidents with U.S. income may need to file Form 1040-NR, and people with exempt days may need Form 8843.
Is a green card holder always a resident?
Generally yes, for tax purposes, until the status is formally ended, even when living abroad, subject to treaty rules.
For general education only, not tax advice. Tax law changes often, so confirm current rules and amounts with primary sources.