U.S. Tax Residency Status
As a general matter, all U.S. citizens and U.S. residents are treated as U.S. tax residents. A non-U.S. citizen is generally classified as a nonresident for U.S. tax purposes unless they satisfy one of two tests: the green card test or the substantial presence test. The U.S. residence tests are generally applied on an annual calendar-year basis.
The Green Card Test
An alien individual satisfies the green card test if, at any time during the calendar year, they are a lawful permanent resident (“LPR”) of the United States under U.S. immigration law. An individual is considered a LPR if the U.S. Citizenship and Immigration Services (“USCIS”) (or its predecessor) has granted them the privilege of residing permanently in the United States. Generally, an individual has this status if USCIS has issued an alien registration card — also known as a “green card.” Note that the expiration of a “green card” does not, in and of itself, terminate residence for tax purposes.
The Substantial Presence Test
An alien individual satisfies the substantial presence test if they are physically present in the United States for at least:
- 31 days during the current calendar year; and
- 183 days during the 3-year period that includes the current calendar year and the 2 immediately preceding calendar years counting:
- All days of physical presence in the United States during the current calendar year, and
- 1/3 of the days the individual was present in 1st preceding year; and
- 1/6 of the days the individual was present in 2nd preceding year.
Residency Elections
The tax law, however, provides for several potential elections that may, where made, override the green card test and the substantial presence test. Those elections include the following:
- First-Year Election To Be Treated as a Resident – A nonresident who qualifies as a U.S. resident under the substantial presence test may elect to be treated as a dual-status resident for the prior tax year, if certain tests are met, by filing a proper election statement making the first-year election.
- Nonresident Spouse Treated as a Resident
- Closer Connection To a Foreign Country
- Tax Treaties
Note that special rules may apply with respect to dual-status taxpayers.
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