Tax season is upon us and Americans across the country are busy preparing their state and federal income tax returns. Many green card holders wonder whether they are subject to U.S. tax reporting obligations and, if so, what those obligations are. Accordingly, this article explains some of the tax reporting obligations of green card holders.
First and foremost, green card holders are generally required to file a U.S. income tax return and report worldwide income no matter where they live. Accordingly, green card holders as permanent residents of the U.S. must file their income tax returns by April 15 of each year unless an extension is granted. To avoid double taxation, permanent residents may claim a foreign tax credit for income tax paid or owed to a foreign country on foreign source income.
Green card holders are considered U.S. tax residents, but in some cases, a green card holder may be a dual-resident taxpayer (a resident of both the U.S. and another country) and may claim the benefits of any applicable tax treaties between the countries. Dual-resident taxpayers who claim treaty benefits as a resident of another country must file a return by the due date (including extensions) using Form 1040NR or Form 1040NR-EZ, and calculate U.S. federal tax obligations as a nonresident alien. Additionally, dual-resident taxpayers claiming treaty benefits must also attach a fully completed Form 8833 if his or her residency is determined under a tax treaty and he or she receives payments or income items totaling more than $100,000.
If you surrender your green card or U.S. Citizenship and Immigration Services (USCIS) determines that you have abandoned your green card, you will need to comply with nonresident alien requirements for filing a Form 1040NR, U.S. Nonresident Alien Income Tax Return. Additionally, foreign nationals who are a lawful permanent resident of the U.S. in at least 8 of the last 15 tax years, he or she will be considered a long-term resident, in which case you may also be subject to expatriation tax if you surrendered your green card.
In some cases, a nonimmigrant visa holder (a foreign nationals without a green card) may also be subject to U.S. tax obligations if he or she spends a certain amount of time in the U.S. each year. Specifically, nonimmigrant visa holders will be subject to U.S. tax obligations if he or she is present in the U.S. at least 31 days during the current year and 183 days during the three-year period that includes the current year and the two years immediately prior. A nonimmigrant visa holder may be exempt from U.S. tax obligations, despite meeting the other requirements for tax residency, if he or she is present in the U.S. less than 183 days in the current year, has not applied for a green card, has a closer connection with a foreign country, and maintains a home in this foreign country.