Who Is a U.S. Tax Resident and Why It Matters

Determining whether someone is a U.S. tax resident is critical because it affects how they are taxed by the United States.

  • U.S. tax residents are taxed on their worldwide income — meaning all income, regardless of where it’s earned.

  • Nonresident aliens are taxed only on certain U.S.-source income and income effectively connected with a U.S. trade or business.

Let’s explore how tax residency is determined under U.S. tax law.

Green Card Test

If you are a lawful permanent resident (commonly known as a green card holder), you are considered a U.S. tax resident starting from the calendar year you obtained your green card, even if you live abroad.

  • You remain a resident until your green card is officially revoked or you are considered to have abandoned it.

  • This applies regardless of the number of days you spend in the U.S.

Substantial Presence Test

Even if you don’t have a green card, you may still be considered a U.S. tax resident if you meet the substantial presence test.

To meet this test, you must be physically present in the U.S. for:

  • At least 31 days during the current year, and

  • 183 days during the 3-year period that includes the current year and the two preceding years, calculated as:

    • All the days present in the current year,

    • 1/3 of the days present in the first preceding year, and

    • 1/6 of the days present in the second preceding year.

Example:
If you were in the U.S. for 120 days each year in 2023, 2024, and 2025, the calculation for 2025 is:
120 (2025) + 40 (1/3 of 2024) + 20 (1/6 of 2023) = 180 days → not a resident (falls below 183).

Tax Treaties and Tie-Breaker Rules

Sometimes, a person qualifies as a tax resident under both U.S. rules and another country’s rules.

In such cases, the U.S. income tax treaties provide tie-breaker rules to determine which country has primary taxing rights.

  • These rules usually look at where the individual has a permanent home, center of vital interests, habitual abode, or nationality.

  • Taxpayers claiming nonresident status under a treaty must file Form 8833 with their U.S. tax return.

Special Exceptions and Categories

  • Certain students, teachers, trainees, diplomats, and foreign government-related individuals may be exempt from counting days for the substantial presence test under specific visa types.

  • First-year election rules may allow a nonresident to choose U.S. residency under certain conditions, even if they don’t fully meet the substantial presence test.

Why Tax Residency Matters

Getting your residency status right is essential because:

  • It determines whether you must report foreign income.

  • It affects your eligibility for foreign tax credits and exclusions.

  • It impacts your filing requirements (Form 1040 for residents vs. Form 1040-NR for nonresidents).

  • Errors can lead to costly penalties, missed credits, or double taxation.

Key Takeaways

  • Green card holders = automatic U.S. tax residents.

  • Substantial presence = meet day count thresholds.

  • Treaties = can override domestic rules in some cases.

  • Always review your visa status, days of presence, and treaty eligibility carefully.

If you are unsure about your U.S. tax residency status, it’s wise to consult a qualified tax professional or carefully review IRS Publication 519, U.S. Tax Guide for Aliens.

For more details, including special elections, forms, and real-world examples, click Contact to speak with a tax advisor experienced in cross-border issues.