United States

Quick Facts

• Tax residency threshold: Meet either the Green Card Test OR the Substantial Presence Test in a calendar year
• Substantial Presence Test formula: 31+ days current year PLUS (1/3 of days prior year) PLUS (1/6 of days two years prior) = 183+ total
• What counts as "day": Any day physically present in the U.S. (even part of the day), with some exclusions (transit, medical conditions, exempt individuals)
• Consequence: U.S. residents (citizens or resident aliens) are taxed on worldwide income; nonresidents taxed only on U.S.-source income
• Common visas: Green Card, H-1B, F-1 student, L-1 intracompany transfer — visa status does not determine tax residency

Residency Rules Explained

• You are a U.S. tax resident if at any time in the calendar year you are a lawful permanent resident (Green Card holder) and haven't formally abandoned that status
• If you relinquish your Green Card during the year, special rules determine your residency termination date
• You are a tax resident if you meet both conditions:
• - Present in the U.S. for at least 31 days in the current year, AND
• - Total of: (all days current year) + (1/3 of days prior year) + (1/6 of days two years prior) = 183 or more days
• Important exclusions:
• - Days commuting from Canada or Mexico
• - Transit days (less than 24 hours in U.S.)
• - Days unable to leave due to medical condition developed while in U.S.
• - Certain exempt individuals (some students on F-1/J-1, teachers under limits)
• Even if you pass the Substantial Presence Test, you may be treated as nonresident if:
• - Fewer than 183 days in the year, AND
• - Your tax home is outside the U.S., AND
• - You have stronger ties to another country
• - Must file Form 8840 to claim this exception
• In your first year, you may elect to be treated as a resident for part of that year if certain conditions are met
• If your status changes during a year (resident to nonresident or vice versa), you may have a dual-status tax year with different rules for each period

Visa vs Tax Residency

Key Dates

• Tax year: Calendar year (1 January – 31 December)
• Filing deadline: April 15 following the tax year (or later with extension)
• Day-count formula: Substantial Presence uses weighted formula: current year counts 100%, prior year counts 33%, two years prior counts 17%
• Residency start: When you first meet either test (or elect First-Year Choice)
• Residency end: Last day of presence or Green Card abandonment date (varies by situation)

Common Pitfalls

• Miscounting days (forgetting exclusions like transit or medical conditions)
• Not understanding the 1/3 + 1/6 weighted formula — many people think it's just 183 days in current year
• Overlooking the closer connection exception if you meet Substantial Presence Test
• Ignoring dual-status rules when moving in or out of U.S.
• Confusing visa status with tax status (having a visa doesn't make you tax resident)
• Not tracking exemptions (student status, teacher status)
• Failing to consider tie-breaker rules if also considered resident by another country

Offshore & Expat Considerations

• Worldwide income taxation: U.S. residents and citizens must report all global income on U.S. tax returns
• Foreign Earned Income Exclusion (FEIE): You may exclude up to $120,000 (2023) of foreign earned income from U.S. tax if you meet tests (bona fide residence abroad or physical presence test)
• Foreign Tax Credit: Alternatively, claim credit for taxes paid to other countries to reduce U.S. tax liability
• Form 6166 / Tax Residency Certification: You can apply to the IRS for a tax residency certificate to claim treaty benefits
• Double taxation & treaties: If another country also claims you as resident, treaty tie-breaker rules (permanent home, center of vital interests, habitual abode, nationality) determine which country has primary taxing rights
• Additional reporting requirements: U.S. persons may have FBAR (foreign bank account reporting) and FATCA obligations beyond income tax
• State tax residency: States have their own residency rules (may differ from federal); you could be federal nonresident but state resident