Fact-checked by Grok 2 weeks ago

Substantial Presence Test

The Substantial Presence Test (SPT) is a formula used by the Internal Revenue Service (IRS) to determine if a non-U.S. citizen or non-U.S. resident alien is considered a U.S. resident for federal income tax purposes based on the total number of days they are physically present in the United States over a three-year period.^[1] Under this test, an individual meets the residency threshold if they are present in the U.S. for at least 31 days during the current calendar year and the weighted total of their presence reaches at least 183 days when combining the current year with the two preceding years.^[1] This test applies alongside the green card test to establish tax residency status, requiring U.S. residents to report worldwide income on their tax returns.^[2] To calculate presence under the SPT, all days physically spent in the U.S. during the current year are counted in full, while days from the first preceding year are multiplied by one-third, and days from the second preceding year are multiplied by one-sixth; the sum must equal or exceed 183 days to trigger residency.^[1] For instance, if an individual is present for 120 days in the current year (2023), 120 days in the prior year (2022), and 120 days two years prior (2021), the calculation yields 120 + (120 × 1/3) + (120 × 1/6) = 120 + 40 + 20 = 180 days, which falls short of the threshold and does not establish residency.^[1] Physical presence includes time in the 50 states, the District of Columbia, U.S. territorial waters, and the seabed or subsoil where the U.S. has resource rights, but excludes U.S. territories, possessions, and airspace.^[1] Certain days are excluded from the count, such as those spent commuting from Canada or Mexico, transiting through the U.S. for less than 24 hours en route to another country, serving as crew on a foreign vessel touching U.S. ports, or being unable to leave due to a medical condition or advice.^[1] Additionally, days of presence for exempt individuals—such as foreign government officials or employees on A or G visas (excluding A-3 or G-5 attendants), teachers or trainees on J or Q visas, students on F, J, M, or Q visas, and professional athletes participating in charitable sports events—are not counted toward the test, provided they file Form 8843 with the IRS.^[1] Even if the SPT is met, exceptions may apply, including the closer connection exception for those with a tax home abroad and significant ties outside the U.S. (claimed by filing Form 8840), or specific rules for students and certain visa holders (who file Form 8843 to claim exemptions).^[3]^[4] These provisions ensure the test accounts for temporary or exempt visits while focusing on substantial, ongoing U.S. presence.^[1]

Introduction

Purpose and Scope

The Substantial Presence Test serves as a key mechanism under U.S. tax law to determine whether non-U.S. citizens qualify as resident aliens for federal income tax purposes based on their physical presence in the country, thereby subjecting them to taxation on their worldwide income similar to U.S. citizens.^[5] This test aims to capture individuals who maintain a significant connection to the U.S. through extended stays, ensuring that tax residency aligns with substantial economic and personal ties without relying solely on immigration status.^[1] Enacted as part of the Deficit Reduction Act of 1984 (Pub. L. 98–369), which added Section 7701(b) to the Internal Revenue Code, the test became effective for taxable years beginning after December 31, 1984.^[6] Subsequent amendments, including those in the Tax Reform Act of 1986 (Pub. L. 99-514), refined its provisions, but as confirmed in the latest IRS guidance through 2025, there have been no major structural changes to the test's core framework.^[5] The IRS's Publication 519, updated annually, continues to outline the test without indicating significant alterations since its inception.^[5] In scope, the Substantial Presence Test applies exclusively to aliens—defined as individuals who are not U.S. citizens—excluding those who are lawful permanent residents (green card holders), whose status is determined separately under the green card test.^[5] It primarily targets nonimmigrant visa holders, such as those on temporary work, student, or visitor visas (e.g., H-1B, F-1, B-1/B-2), as well as undocumented individuals and other nonresidents who are physically present in the U.S.^[1] While it operates alongside the green card test within the broader framework of U.S. tax residency determination under IRC Section 7701(b), the Substantial Presence Test focuses solely on days of physical presence rather than formal immigration documentation.^[6]

Relation to Overall U.S. Tax Residency

The U.S. tax residency framework establishes an individual as a resident for federal income tax purposes if they satisfy either the green card test or the Substantial Presence Test during a calendar year.^[2] This dual structure ensures comprehensive coverage, with the green card test focusing on immigration status and the Substantial Presence Test evaluating physical presence in the United States.^[5] Under the green card test, residency begins automatically on the first day an individual is present in the United States as a lawful permanent resident, as evidenced by Form I-551 or an equivalent document issued under U.S. immigration laws.^[5] This status persists throughout the calendar year unless revoked by a final administrative or judicial order of exclusion or deportation, or formally abandoned through filing Form I-407 with U.S. Citizenship and Immigration Services (USCIS) or a consular officer.^[5] The Substantial Presence Test complements the green card test by providing the primary mechanism for determining residency among non-permanent residents, based on days of physical presence—such as meeting the threshold of at least 31 days in the current year and 183 days over a three-year weighted period.^[1] If an individual meets both tests in a given year, U.S. tax residency is established without conflict, as the tests are alternative pathways rather than mutually exclusive.^[5] Residency under either test is assessed on a calendar-year basis, meaning status is determined annually even if presence or status changes mid-year, with the full year treated as resident unless a specific ending date applies.^[2]

Core Mechanics

The Presence Formula

The substantial presence test determines U.S. tax residency based on an individual's physical presence in the United States over a three-year period, using a weighted formula to aggregate days. An individual meets the test if they are present in the U.S. for at least 31 days during the current tax year and the total weighted days of presence equals or exceeds 183 days, calculated as the sum of all days in the current year plus one-third of the days in the immediately preceding year plus one-sixth of the days in the second preceding year.^[5] This formula, outlined in IRS Publication 519 (Rev. 2024), remains unchanged for tax year 2025.^[5] The formula weights days to emphasize recent presence while accounting for prior years' activity, with full credit given only to the current tax year and partial weighting applied to the two preceding years to reflect a pattern of ongoing U.S. ties. Specifically, every day of physical presence in the current year counts as one full day, whereas days from the prior year are divided by three and days from the second prior year are divided by six.^[5] A day of presence generally includes any portion of a day spent within U.S. territory, excluding certain transit or exempt periods (detailed in subsequent sections).^[5] For illustration, consider an individual present for 150 days in 2025 (current year), 120 days in 2024 (prior year), and 90 days in 2023 (second prior year). The calculation is:

\text{Total weighted days} = 150 + \frac{120}{3} + \frac{90}{6} = 150 + 40 + 15 = 205

Since 205 exceeds 183 and the current-year presence meets the 31-day minimum, the individual satisfies the substantial presence test for 2025.^[5] This example demonstrates how the formula aggregates presence to identify substantial U.S. connections, even if no single year exceeds the threshold alone.^[5]

Counting Days of Presence

Under the Substantial Presence Test, any day on which an individual is physically present in the United States at any time during the calendar day is counted as a full day of presence, regardless of the duration of the stay. This includes both the day of arrival and the day of departure, treating even momentary presence—such as a one-hour visit—as equivalent to a complete 24-hour day with no provision for proration or partial credits.^[5]^[7] Certain days are excluded from the count to reflect situations where presence does not meaningfully engage with U.S. territory. Specifically, days spent in the United States solely in transit between two foreign destinations, such as layovers in an airport's international transit area without formally entering U.S. territory, are not counted, provided the stay is less than 24 hours and limited to transit-related activities.^[5]^[8] Similarly, days spent as a crew member on a foreign vessel or aircraft engaged in international traffic do not contribute to the presence tally, as they occur beyond the geographic scope where presence is measured or qualify for exclusion.^[5] To support claims under the test, individuals must maintain detailed records of their physical presence, including passport stamps, airline tickets, boarding passes, and other travel documentation that verify entry and exit dates. The Internal Revenue Service (IRS) may conduct audits to review these records and ensure accurate counting, potentially disallowing unsubstantiated exclusions if documentation is inadequate.^[5]

Defining U.S. Territory

For the purposes of the substantial presence test, the term "United States" is defined geographically as the 50 states, the District of Columbia, the territorial waters of the United States, and the seabed and subsoil of submarine areas adjacent to the United States over which the United States has exclusive rights under international law to explore and exploit natural resources.^[5] This definition, drawn from the Internal Revenue Code, ensures that physical presence is measured strictly within these areas for determining tax residency.^[9] U.S. territories and possessions, such as Puerto Rico, Guam, American Samoa, the U.S. Virgin Islands, and the Commonwealth of the Northern Mariana Islands, are explicitly excluded from this definition, meaning days spent in these locations do not count toward the substantial presence calculation.^[5] Similarly, presence in U.S. airspace or international waters and airspace does not qualify as presence in the United States, as the test focuses on physical presence within the defined territorial boundaries.^[5] Physical presence is triggered by being in the United States at any time during the day, typically upon entry through official ports of entry or borders, but only if the location falls within the specified geographic scope.^[5] An important edge case involves U.S. military installations located abroad; time spent on such bases does not count as presence in the United States, since these facilities are situated outside the defined U.S. territory and are governed by host country agreements.^[5] This exclusion aligns with the test's emphasis on domestic physical presence and prevents inadvertent inclusion of overseas activities under U.S. jurisdiction.^[9] The Internal Revenue Service provides these clarifications to maintain consistency in applying the test across various scenarios.^[5]

Application Across Tax Years

The Substantial Presence Test evaluates an individual's physical presence in the United States over a full calendar year, defined as the period from January 1 to December 31, regardless of whether the individual's presence begins or ends mid-year.^[5] This standard ensures that the test captures the cumulative impact of days spent in the U.S. within the designated timeframe, treating the entire year as the unit of analysis for residency determination.^[5] In partial-year scenarios, where an individual arrives or departs from the U.S. during the calendar year, meeting the Substantial Presence Test still establishes resident alien status for the portion of the year from the residency starting date.^[5] For instance, if an individual enters the U.S. on July 1 and accumulates sufficient days to satisfy the test by December 31, they are considered a U.S. resident starting from their first day of presence (July 1), with dual-status taxation applying for the year—nonresident from January 1 to June 30 and resident thereafter.^[5] This full-year application underscores the test's role in preventing fragmented residency assessments based on entry or exit dates. The test incorporates multi-year weighting by considering only the current calendar year and the two immediately preceding years, rendering presence in earlier years irrelevant to the calculation.^[5] Days from these years are weighted—all from the current year, one-third from the first prior year, and one-sixth from the second prior year—to reach the 183-day threshold, as outlined in the core formula.^[5] As of 2025, no changes have been made to this structure, and the test continues to apply prospectively from an individual's first day of presence in the U.S.^[5]

Tax Consequences

Determining Residency Status

The Substantial Presence Test (SPT) serves as a primary mechanism for classifying non-U.S. citizens as resident aliens for federal income tax purposes when they have spent sufficient time in the United States. An individual meets the SPT if they are physically present in the U.S. for at least 31 days during the current year and 183 days over a three-year weighted period, as calculated under the test's formula. Upon meeting these thresholds, the individual is deemed a resident alien, subjecting them to U.S. taxation on their worldwide income, regardless of its source.^[1]^[2] In contrast, failing the SPT results in classification as a nonresident alien, limiting U.S. tax liability to income sourced within the United States, such as wages earned from U.S. employment or income from U.S. real property. This distinction ensures that temporary visitors or those with limited presence are not taxed on foreign earnings. The residency determination under the SPT operates independently but in conjunction with the green card test; meeting either criterion establishes resident status, while the SPT can override a lack of lawful permanent residency to impose resident taxation.^[2]^[10] The residency status conferred by the SPT applies specifically to the calendar tax year in which the presence thresholds are met, requiring annual re-evaluation based on the individual's physical presence in subsequent years. This yearly assessment allows for potential shifts in status, such as from resident to nonresident if presence falls below the required days. Once determined, the status governs the individual's tax obligations for that year, influencing reporting and compliance requirements accordingly.^[1]^[2]

Filing Obligations

Individuals determined to be resident aliens under the substantial presence test must file a U.S. individual income tax return to report their worldwide income and calculate any tax liability, using Form 1040 (U.S. Individual Income Tax Return) or Form 1040-SR for those aged 65 or older.^[5] This filing requirement applies for the tax year in which the test is met, treating the individual as a U.S. resident for tax purposes from the first day of physical presence in that year or the residency starting date, whichever is later.^[5] If the resident alien claims benefits under an income tax treaty between the United States and their country of residence that alters the tax treatment of certain income, they must attach Form 8833 (Treaty-Based Return Position Disclosure Under Section 6114 or 7701(b)) to their Form 1040 to disclose the specific treaty position, particularly if it involves dual-residency tie-breaker rules or other adjustments exceeding certain thresholds.^[11]^[5] Unlike nonresident aliens, who use Form 1040-NR (U.S. Nonresident Alien Income Tax Return) to report only U.S.-sourced income, those meeting the substantial presence test do not file Form 1040-NR unless they are in a dual-status situation for part of the year.^[5] The filing deadline for Form 1040 is generally April 15 of the year following the tax year, though automatic extensions to October 15 can be requested using Form 4868 (Application for Automatic Extension of Time To File U.S. Individual Income Tax Return), provided any tax owed is paid by the original due date. For individuals without a Social Security Number (SSN), an Individual Taxpayer Identification Number (ITIN) is required to file; first-time filers apply for an ITIN using Form W-7 (Application for IRS Individual Taxpayer Identification Number) submitted with the tax return.

Liability for U.S. Taxes

Individuals who meet the Substantial Presence Test are classified as resident aliens for U.S. tax purposes and are subject to taxation on their worldwide income, just as U.S. citizens are. This means all income earned from sources inside and outside the United States must be reported and is potentially taxable, including wages, investments, rental income, and capital gains. Resident aliens file Form 1040 to report this income, similar to citizens, and are eligible for the same deductions, credits, and exclusions, such as the standard deduction or itemized deductions for state and local taxes (capped at $10,000 for most filers).^[5] The federal income tax rates applied to resident aliens are progressive, ranging from 10% to 37% for the 2025 tax year, depending on taxable income and filing status. For example, single filers with taxable income up to $11,925 pay 10%, while those with income over $626,350 face the top 37% rate. These rates apply uniformly to worldwide income after adjustments, allowing resident aliens to benefit from credits like the Earned Income Tax Credit or Child Tax Credit if they qualify.^[12]^[5] In addition to federal taxes, resident aliens may owe state income taxes based on their physical presence and income sourced to specific states, as state tax rules generally treat them like U.S. citizens. For instance, states like California and New York impose progressive income taxes on residents' worldwide income, while others, such as Texas, have no state income tax. Obligations vary widely by state residency definitions and sourcing rules, requiring separate state returns where applicable.^[5]^[13] Upon later relinquishing U.S. tax residency, individuals who met the Substantial Presence Test but did not hold long-term lawful permanent resident status typically do not face expatriation tax under Internal Revenue Code Section 877A. However, if such individuals subsequently obtain green card status and become long-term residents (holding it for at least eight of the prior 15 tax years), they may be subject to an exit tax on unrealized gains if they expatriate, treated as a deemed sale of worldwide assets at fair market value. This provision aims to prevent tax avoidance through residency relinquishment.^[5]^[14]

Immigration and Status Distinctions

Tax Residency vs. Permanent Residency

Tax residency under the Substantial Presence Test is determined solely by the Internal Revenue Service (IRS) based on an individual's physical presence in the United States, whereas permanent residency is an immigration status governed by the U.S. Citizenship and Immigration Services (USCIS) and the Department of Homeland Security (DHS), typically through obtaining a green card (Form I-551).^[5] The Substantial Presence Test focuses on fiscal obligations, classifying individuals as resident aliens for tax purposes if they meet the day-count threshold, irrespective of their visa type or legal immigration standing. In contrast, permanent residency confers rights such as the ability to live and work indefinitely in the U.S., but it does not inherently dictate tax treatment beyond the separate green card test for residency.^[1]^[5] For instance, a nonimmigrant visa holder, such as a tourist on a B-2 visa, may accumulate sufficient days of presence to satisfy the Substantial Presence Test and thus become a tax resident, required to report worldwide income to the IRS, without ever obtaining permanent residency status.^[5] Conversely, a lawful permanent resident (green card holder) who resides abroad for an extended period and fails to meet the Substantial Presence Test remains a tax resident under the green card test unless they formally abandon their status by filing Form I-407 with USCIS.^[5]^[15] These scenarios illustrate how tax residency can arise independently of immigration permanency, allowing temporary visitors to incur U.S. tax liabilities while green card holders maintain their status without physical presence.^[2] There is no automatic connection between meeting the Substantial Presence Test and changes in immigration status; satisfying the test does not grant, revoke, or imply any alterations to permanent residency or visa eligibility, as these are handled by distinct federal agencies with separate jurisdictional scopes.^[5] As of 2025, no legislative or regulatory updates have bridged these domains, preserving their independence to ensure tax enforcement aligns with physical presence rather than immigration intent.^[5]

Resident and Nonresident Alien Categories

A resident alien is an individual who meets either the green card test, by holding lawful permanent resident status under U.S. immigration laws, or the substantial presence test, which aggregates days of physical presence in the United States over a three-year period to reach at least 183 days.^[5] As a result, resident aliens are subject to U.S. taxation on their worldwide income, similar to U.S. citizens, and must report all sources of income from inside and outside the United States.^[5] They are generally eligible for the same tax benefits as citizens, including the ability to claim refunds for overwithheld taxes, standard and itemized deductions, and various tax credits such as the earned income credit or child tax credit, provided they meet the underlying eligibility criteria.^[5] In contrast, a nonresident alien is any alien who does not satisfy the green card test or the substantial presence test.^[5] Nonresident aliens are taxed solely on U.S.-source income, which includes income effectively connected with a U.S. trade or business—taxed at graduated rates akin to those for residents—and fixed, determinable, annual, or periodical (FDAP) income, such as interest, dividends, or royalties, typically subject to a flat 30% withholding tax unless reduced by a tax treaty.^[5] Their access to tax benefits is more restricted; for instance, they may claim deductions only if directly allocable to effectively connected income and are generally ineligible for standard deductions or personal exemptions, except in specific treaty cases like those under the U.S.-India tax treaty for certain students.^[5] Dual-status aliens, who transition between resident and nonresident status within the same tax year—such as upon initial arrival or departure—are categorized based on their status during specific periods of the year, with taxation applied accordingly to worldwide income during the resident portion and U.S.-source income during the nonresident portion.^[5] The classification as a resident or nonresident alien significantly influences eligibility for benefits under U.S. tax treaties, which may provide reduced withholding rates, exemptions, or tie-breaker rules to resolve dual-residency conflicts for nonresidents.^[5] Additionally, it affects exposure to U.S. estate and gift taxes: resident aliens are liable on their worldwide assets, while nonresident aliens face taxation only on U.S.-situs property, such as real estate or tangible personal property located in the United States.^[5]

Exemptions and Exceptions

Foreign government-related individuals are exempt from counting days of presence in the United States toward the substantial presence test if they are temporarily present in an official capacity. This category includes diplomats, consular officers, and other employees of foreign governments who hold diplomatic status, as well as full-time employees of designated international organizations such as the United Nations. Immediate family members, including spouses and unmarried children under 21 living in the household, also qualify if their visa status is derived from the exempt individual. Typically, these individuals enter the U.S. on A visas (for diplomatic purposes, excluding A-3 personal attendants) or G visas (for international organizations, excluding G-5 personal attendants).^[16] The exemption requires that the individual's presence be connected to official duties and recognized by U.S. authorities, often through accreditation by the U.S. Department of State or provisions in bilateral tax treaties and international agreements. Under Internal Revenue Code Section 7701(b)(5)(A)(iv) and (v), all days physically present in the U.S. are disregarded for residency determination purposes, preventing these individuals from being classified as residents under the substantial presence test regardless of the duration of their stay. For international organization staff, eligibility stems from executive orders under the International Organizations Immunities Act (22 U.S.C. §§ 288-288f). To claim related income tax exemptions on compensation from official duties, eligible individuals may file Form 8233 to request withholding exemption, which must be submitted to the withholding agent and forwarded to the IRS.^[16]^[17]^[18] The exemption is limited to periods of temporary presence in an official role and ceases if duties end, status changes (e.g., to lawful permanent resident), or the individual engages in unauthorized employment or activities. In such cases, prior days may retroactively count toward the substantial presence test, potentially triggering resident status. Proof of eligibility often involves certification from the U.S. Department of State; without it, written evidence of status must be provided to payers or the IRS. Changes in status must be promptly reported to withholding agents to adjust tax treatment accordingly.^[16]^[17]

Visa-Specific Exemptions

Certain nonimmigrant visa holders are classified as "exempt individuals" under the substantial presence test, meaning their days of presence in the United States do not count toward the 183-day threshold for determining tax residency. This exemption applies to individuals present under F (academic student), J (exchange visitor or scholar), M (vocational student), or Q (international cultural exchange visitor) visas, provided they substantially comply with the terms of their visa and do not intend to reside permanently in the United States.^[19] For students, including those under F, J, M, or Q visas, and their spouses or minor children, days of presence are excluded for up to five calendar years, starting from the first year of presence in the United States under such status. Teachers, trainees, researchers, or scholars under J or Q visas, along with their spouses or minor children, qualify for exclusion of days for up to two calendar years within the six preceding years, unless compensation is received from a foreign employer, in which case the exemption may extend without the two-year limit. Q visa holders engaged in cultural exchange programs as teachers, trainees, or students may receive an unlimited exemption if they meet ongoing compliance conditions, such as program participation without intent to immigrate. These exemptions do not apply if the individual engages in unauthorized employment or otherwise violates visa terms.^[19] Days of presence are also excluded for individuals unable to leave the United States due to a medical condition or problem that arose while in the country, provided they can demonstrate an intent to depart upon recovery. This includes days spent hospitalized, undergoing medical treatment, or traveling to and from the United States for such treatment or to return home, with up to 15 additional days allowed for related travel. Pre-existing conditions or unreasonably extended stays due to the condition do not qualify. For example, if an individual arrives on a temporary visa, falls ill, and requires hospitalization for 30 days followed by 10 days of treatment and 5 days of travel, those 45 days would not count toward the substantial presence test.^[19] Professional athletes temporarily present solely to compete in a charitable sports event are exempt for the days of actual competition, provided the event's primary purpose is raising funds for charity, all net proceeds benefit qualified charities, and the majority of work is performed by volunteers rather than professionals. Practice days, travel days, or other non-competition days do not qualify for this exemption. For instance, a foreign athlete competing in a single-day charity golf tournament would exclude only that competition day from the count.^[19] In applying these exemptions to the substantial presence test's three-year lookback period (current year days plus one-third of the prior year's days plus one-sixth of the second prior year's days), only days of presence during which the individual held an F, J, M, or Q visa status are considered for counting; days under other visa types or statuses do not trigger the exemption rules. All exempt individuals, including those claiming medical or athlete exemptions, must file Form 8843, Statement for Exempt Individuals and Individuals With a Medical Condition, by the due date of their U.S. tax return (or June 15 if no return is required), even if they have no income to report. Failure to file Form 8843 may result in loss of the exemption and potential reclassification as a resident alien.^[19]

Closer Connection Exception

The closer connection exception allows certain aliens who meet the substantial presence test to be treated as nonresident aliens for U.S. tax purposes if they can demonstrate stronger ties to a foreign country than to the United States.^[3] This exception applies only if the individual is physically present in the United States for fewer than 183 days during the current tax year, maintains a tax home in a foreign country throughout the year, and has not taken steps toward obtaining lawful permanent resident status.^[5] A tax home is defined as the individual's main place of business, employment, or post of duty, regardless of where they maintain their family home; it must be located outside the United States for the entire year to qualify.^[20] To establish a closer connection to a foreign country, the individual must show more significant personal and economic ties there than to the U.S., based on factual circumstances rather than mere intent.^[5] Relevant factors include the location of their permanent home (such as a continuously available house, apartment, or room), family members, personal belongings, automobiles, banking or investment accounts, driver's license, voter registration, and official documents designating residence.^[3] Additional considerations encompass social, professional, or religious organization memberships; charitable contributions; and business activities or employment.^[5] For instance, maintaining a family home abroad, holding a foreign driver's license, and conducting banking primarily overseas would support a claim of closer foreign ties.^[20] If the tax home shifts between two foreign countries during the year, closer connections must be demonstrated to each respective country during the relevant periods, with the individual subject to tax as a resident in at least one of those countries.^[3] To claim the exception, the individual must file Form 8840, Closer Connection Exception Statement for Aliens, either attached to their U.S. federal income tax return (such as Form 1040-NR) or, if no return is required, mailed separately to the Internal Revenue Service Center in Austin, TX 73301-0215.^[21] The form must be filed by the due date of the tax return, including extensions; for those not filing a return, the deadline is June 15 of the following year (e.g., June 15, 2026, for the 2025 tax year).^[20] Accompanying the form is a required statement in Part IV detailing the individual's name, U.S. address, taxpayer identification number, visa or passport information, the foreign country of closer connection, and specific facts supporting the tax home and closer ties (e.g., addresses of family and banking abroad).^[5] Late filing may be accepted only with clear and convincing evidence of reasonable cause for delay.^[3] This exception is unavailable to lawful permanent residents (green card holders) or those with a pending application for permanent residency, such as Form I-485.^[20] It also does not apply if the individual is present in the U.S. for 183 days or more in the current year.^[5] Additionally, even if an individual is ineligible for the closer connection exception, they may still qualify as a nonresident alien under a U.S. income tax treaty if the treaty's tie-breaker rules determine residency in the foreign country.^[20] Certain exempt individuals, such as students under F, J, M, or Q visas who have exceeded their exemption periods, may claim a special closer connection exception if they have no intent to reside permanently in the U.S., comply with visa terms, have no steps toward lawful permanent resident status, and maintain a closer connection to a foreign country than to the U.S. This special rule does not require presence for fewer than 183 days in the current year or a foreign tax home and is claimed on Form 8843, Part III.^[5]^[4] As of 2025, there have been no changes to the closer connection exception rules, and the IRS continues to emphasize objective, factual connections—such as documented ties to family, property, and financial accounts—over subjective intent in evaluating claims.^[5]

Dual-Status Considerations

Dual-Status Taxpayer Definition

A dual-status taxpayer is an individual who qualifies as both a resident alien and a nonresident alien for U.S. federal income tax purposes within the same calendar tax year. This status typically arises when a person's residency changes mid-year, such as transitioning from nonresident to resident due to accumulating sufficient days of physical presence in the United States. Under U.S. tax law, such changes are determined by the green card test or the substantial presence test, with the latter often triggering dual status in the first year an individual meets the presence requirements after prior years of nonresidency.^[5] The substantial presence test creates a dual-status situation when an individual who was a nonresident alien in the preceding year meets the test for the current year but only partway through it. Specifically, the test is satisfied if the person is present in the U.S. for at least 31 days during the current year and 183 days over a weighted three-year period (all current-year days plus one-third of the prior year's days plus one-sixth of the second prior year's days). The residency starting date for tax purposes is generally the first day of physical presence in the current year, though it may be adjusted by up to 10 days later (by excluding initial days of presence) if the individual maintains a closer connection to a foreign country during that period.^[5] This partial-year presence results in the individual being treated as a nonresident for the initial portion of the year and a resident thereafter.^[5] For taxation, a dual-status taxpayer is subject to U.S. income tax on U.S.-source income only during the nonresident period, which is taxed at a flat 30% rate (or lower treaty rate) on certain income types like fixed or determinable annual or periodical gains, unless effectively connected with a U.S. trade or business. After the status change to resident, the individual is taxed on worldwide income at graduated rates applicable to U.S. residents, similar to U.S. citizens. This bifurcation requires careful allocation of income, deductions, and credits between the two periods based on the exact date of the change.^[5] Reporting for dual-status taxpayers involves filing a special dual-status income tax return, which combines elements of both resident and nonresident filings. The taxpayer must submit Form 1040-NR marked "Dual-Status Return" for the nonresident period and attach Form 1040 for the resident period. A detailed statement must be attached to explain the dual status, including the date of the residency change, allocation of income and expenses between periods, and any applicable treaty positions. This statement ensures proper computation of tax liability and compliance with withholding and estimated payment rules. Failure to attach the statement may result in processing delays or penalties.^[5]

First-Year Election Option

The first-year election under Internal Revenue Code (IRC) Section 6013(h) allows a dual-status taxpayer to be treated as a full-year U.S. resident for tax purposes in the year they transition from nonresident to resident alien status. This election is available only if the individual was a nonresident alien at the beginning of the tax year, becomes a U.S. resident by the end of the year (for example, by meeting the substantial presence test), and is married to a U.S. citizen or resident alien at year-end.^[22]^[5] To make the election, the dual-status taxpayer and their spouse must file a joint U.S. individual income tax return using Form 1040 or 1040-SR, attaching a signed statement that includes both spouses' names, addresses, taxpayer identification numbers, and a declaration of the intent to elect under Section 6013(h). The statement must affirm the nonresident status at the year's start and the residency change by year-end. This election cannot be made until the taxpayer's residency status is confirmed, such as after meeting the substantial presence test, and the return must be filed by the due date (including extensions). If the due date passes before confirmation, Form 4868 can be used for an automatic extension.^[22]^[5] The primary effect of the election is that the dual-status individual is treated as a U.S. resident for the entire tax year for purposes of income taxation under Chapters 1 and 24 of the Internal Revenue Code, subjecting their worldwide income to U.S. tax on a joint basis with their spouse. This enables access to benefits unavailable in dual-status filing, such as the standard deduction, joint filing status with potentially lower tax rates, and eligibility for certain refundable credits like the earned income tax credit or child tax credit, which can result in tax savings or refunds. However, treaty benefits are generally unavailable during the resident period, and the election does not apply to other taxes like self-employment tax.^[22]^[5] The election applies solely to the tax year in which it is made and does not bind future years, where residency status will be determined by the green card test, substantial presence test, or other rules. It is irrevocable for that year without IRS consent and represents a one-time option tied to the specific year of residency change; it cannot be repeated in later years even with the same spouse. Per IRS Publication 519, failure to properly document the election may result in the taxpayer being treated as dual-status, requiring separate returns for the nonresident and resident portions of the year.^[22]^[5]

Spousal and Joint Filing Rules

Dual-status taxpayers, who are considered both residents and nonresidents for U.S. tax purposes in the same year, have specific options for joint filing when married to a U.S. citizen or resident alien. If the dual-status individual is married to a U.S. citizen or resident alien at the end of the tax year, both spouses may elect under IRC § 6013(h) to treat the dual-status spouse as a full-year U.S. resident, allowing them to file a joint income tax return on Form 1040 as if the dual-status spouse were a resident for the entire year.^[5]^[23] This election overrides the standard dual-status filing requirements, such as attaching a dual-status statement to Forms 1040 or 1040-NR, and treats the couple's worldwide income as subject to U.S. taxation.^[5] Both spouses must consent to the election by signing the joint return.^[24] To make the election, the couple files a joint Form 1040 or 1040-SR, checks the appropriate box in the filing status section (introduced in 2024 for this purpose), and attaches a signed statement declaring the election, including both spouses' names, addresses, and taxpayer identification numbers.^[5] The election can also be made or amended using Form 1040-X within three years after filing the return or two years after paying the tax, whichever is later.^[24] Once made, the election applies only to the current tax year of the residency change.^[5] This option is particularly relevant for dual-status taxpayers who meet the substantial presence test partway through the year, as it simplifies reporting compared to separate dual-status returns.^[23] If no election is made, the dual-status taxpayer files a dual-status return using Form 1040-NR marked "Dual-Status Return" with Form 1040 attached for the resident period (assuming residency at year-end), while the U.S. citizen or resident spouse files separately.^[5] Joint filing under the election offers benefits such as income splitting to potentially lower the overall tax bracket, access to additional deductions and credits unavailable to nonresidents (e.g., the standard deduction), and simplified compliance.^[24] However, it exposes the non-U.S. source income of both spouses to U.S. taxation and may forfeit tax treaty benefits that the dual-status spouse could otherwise claim.^[5] The election is revocable under limited circumstances with IRS consent, as it applies only to the year made. Automatic termination may occur upon the death of either spouse, legal separation, or divorce.^[5] In cases of spousal abuse or extreme hardship, the IRS may grant relief from the election's effects, but such exceptions are rare and require specific documentation.^[5]

International Comparisons

Similar Tests in Other Jurisdictions

Several countries employ physical presence tests to determine tax residency, often using a 183-day threshold as a key benchmark, analogous to the U.S. Substantial Presence Test, though integrated with other factors such as residential ties or intent.^[25] In Canada, tax residency is primarily assessed through factual residency based on significant residential ties, such as a home, spouse, or dependents in the country, but a deemed residency rule applies if an individual sojourns in Canada for 183 days or more in a calendar year.^[26] This 183-day presence creates a presumption of residency unless rebutted by evidence of stronger ties elsewhere, providing a similar weighting to physical presence as in the U.S. but with an explicit deemed status for extended stays.^[26] The United Kingdom's Statutory Residence Test (SRT) incorporates an automatic residency trigger if an individual is present for 183 days or more in a tax year (April 6 to April 5), making physical presence a conclusive factor without needing further analysis.^[27] However, the SRT is more multifaceted than the U.S. test, including additional automatic overseas tests—such as spending fewer than 16 or 46 days in the UK depending on prior residency—and a sufficient ties test that considers family, work, and accommodation links if presence falls between 16 and 183 days.^[27] Australia determines tax residency through four statutory tests, with the 183-day test deeming an individual a resident if physically present for more than half the income year (183 days), unless their usual place of abode remains overseas and they lack intent to reside in Australia.^[28] The domicile test serves as the primary criterion, establishing residency for those domiciled in Australia unless they have a permanent place of abode abroad, positioning physical presence as a secondary but supportive element alongside intent and overall circumstances.^[29] These approaches reflect broader patterns among OECD countries, where a 183-day physical presence benchmark is commonly used to establish tax residency, often in combination with ties-based assessments to address cross-border mobility.^[25]

Key Differences from U.S. Approach

The U.S. substantial presence test differs structurally from many international counterparts in its use of a multi-year weighted calculation for physical presence thresholds. Specifically, it requires at least 31 days of presence in the current year and a total of 183 days over three years—all days in the current year, plus one-third of the days in the prior year, and one-sixth of the days in the second preceding year—without a single-year cap triggering residency on its own.^[1] In contrast, countries like Canada and the United Kingdom apply a simpler single-year threshold of 183 days or more of presence, which automatically deems an individual a tax resident regardless of prior years' activity.^[26]^[30] This U.S. approach aims to capture intermittent but cumulative stays, while the Canadian and UK rules emphasize immediate annual exposure.^[26]^[30] Another key distinction lies in the integration of personal and economic ties into residency determinations, which is absent from the U.S. formula-driven test. In jurisdictions such as Australia, tax residency is assessed holistically, combining physical presence with evaluations of an individual's "center of vital interests," including factors like family location, permanent home, employment, and social connections.^[31] Australia's primary "resides" test, for instance, weighs these ties to determine if a person is ordinarily resident, even if presence falls below 183 days, supplemented by a safe-harbor 183-day rule only if ties are minimal.^[31] The U.S. test, by comparison, relies solely on day counts without qualitative tie-breaker analysis in its core mechanics, deferring such considerations primarily to treaty provisions.^[1] Exemptions from presence-based residency also highlight divergences, with the U.S. incorporating domestic visa-specific carve-outs directly into its test. Certain nonimmigrant visa holders, such as students (F or J visas), teachers (Q visas), and diplomats, have their U.S. days excluded from the count for up to five years or indefinitely, preventing inadvertent residency.^[1] Other countries, however, tend to address exemptions through bilateral or multilateral tax treaties rather than visa categories, with EU member states relying on national residency rules harmonized via directives like the Parent-Subsidiary Directive but resolved via OECD-model tie-breakers in treaties for cross-border cases.^[32]^[33] Global trends post-2020 underscore evolving adaptations outside the U.S., particularly for mobile workers. Portugal, for example, revamped its Non-Habitual Resident regime effective January 1, 2024, introducing the IFICI (Incentive for Scientific Research and Innovation, also known as NHR 2.0) to attract qualified professionals in scientific research, innovation, and fields like IT and startups, offering a 20% flat tax on eligible Portuguese income and exemptions on most foreign-sourced income for qualifying tax residents (generally those present 183 days or more annually).^[34] This shift responds to remote work growth, providing tailored incentives not tied to visa exemptions. The U.S. substantial presence test, however, has seen no substantive updates as of 2025, maintaining its pre-2020 framework amid ongoing digital mobility challenges.^[1]

References

[1]
Substantial presence test | Internal Revenue Service
Mar 14, 2025 · To determine if you meet the substantial presence test for 2023, count the full 120 days of presence in 2023, 40 days in 2022 (1/3 of 120), and ...Closer connection exceptionWho is a studentThe closer connection ...Foreign government-relatedTeachers and trainees
[2]
Determining an individual's tax residency status - IRS
Aug 26, 2025 · You are a resident of the United States for tax purposes if you meet either the green card test or the substantial presence test for the calendar year.
[3]
Closer connection exception to the substantial presence test - IRS
Jul 15, 2025 · Even if you met the substantial presence test, you can still be treated as a nonresident of the United States for U.S. tax purposes, ...
[4]
Publication 519 (2024), U.S. Tax Guide for Aliens | Internal Revenue Service
Summary of each segment:
[5]
26 U.S. Code § 7701 - Definitions | LII / Legal Information Institute
Residency starting date for individuals meeting substantial presence test. In ... 110–245, set out as an Effective Date note under section 2801 of this title.United States · Person · State
[6]
https://www.law.cornell.edu/uscode/text/26/7701
[7]
https://www.law.cornell.edu/cfr/text/26/301.7701(b)-1
[8]
Taxation of nonresident aliens | Internal Revenue Service
May 27, 2025 · A nonresident alien is an alien who has not passed the green card test or the substantial presence test. ... Publication 519, U.S. Tax Guide for ...
[9]
About Form 8833, Treaty-Based Return Position Disclosure ... - IRS
Dec 3, 2024 · Taxpayers use this form to make the treaty-based return position disclosure required by Internal Revenue Code section 6114.Missing: substantial presence test OI
[10]
2025 Tax Brackets and Federal Income Tax Rates | Tax Foundation
Oct 22, 2024 · The federal income tax has seven tax rates in 2025: 10 percent, 12 percent, 22 percent, 24 percent, 32 percent, 35 percent, and 37 percent.2024 Tax Brackets · 2026 Tax Brackets if the TCJA... · 2023 Tax Brackets
[11]
Do immigrants pay taxes? | Tax Policy Center
Yes – immigrants of all legal statuses in the US pay federal, state, and local taxes. Like all other residents, immigrants of all legal statuses are required ...
[12]
Expatriation from the United States: The Exit Tax - The Florida Bar
Nov 6, 2020 · A U.S. resident alien (under the U.S. substantial presence income tax test) is not subject to the §§877 or 877A tax if the resident has ...
[13]
https://taxpolicycenter.org/briefing-book/do-immigrants-pay-taxes
[14]
Exempt individuals: foreign government-related individuals - IRS
Apr 3, 2025 · None of their days count for the purposes of the substantial presence test. Caution: An individual present in the United States under an "A-3" ...
[15]
Employees of foreign governments or international organizations - IRS
Jun 7, 2025 · Employees of foreign governments or international organizations are generally exempt from withholding of U.S. taxes.
[16]
About Form 8233, Exemption From Withholding on Compensation ...
Oct 1, 2025 · This form is used by non resident alien individuals to claim exemption from withholding on compensation for personal services.
[17]
[PDF] 2024 Publication 519 - IRS
This publication will help you deter- mine your status and give you information you will need to file your U.S. tax return. Resident aliens are generally taxed ...
[18]
[PDF] Closer Connection Exception Statement for Aliens - IRS
Apr 28, 2025 · If you are an alien individual and you meet the closer connection exception to the substantial presence test, you must file Form. 8840 with the ...
[19]
About Form 8840, Closer Connection Exception Statement for Aliens
Dec 4, 2024 · Use Form 8840 to claim the closer connection to a foreign country(ies) exception to the substantial presence test.
[20]
[PDF] Election Under Section 6013h - IRS
Aug 28, 2014 · This is a one-time election valid only for the year in which the nonresident alien spouse becomes a U.S. resident under one of the standard ...
[21]
Taxation of dual-status individuals | Internal Revenue Service
Nov 22, 2024 · A nonresident who becomes a U.S. resident under the substantial presence test in the following tax year may choose to be treated as a dual ...
[22]
Nonresident spouse | Internal Revenue Service
Mar 14, 2025 · If you and your spouse do not choose to treat the nonresident spouse as a U.S. resident, you may be able to use head of household filing status.
[23]
Tax residency - OECD
This section provides an overview of the tax residency rules applicable in jurisdictions that are committed to automatically exchanging information under ...Missing: presence 183 days commonalities
[24]
Income Tax Folio S5-F1-C1, Determining an Individual's Residence ...
1.8 To determine residence status, all of the relevant facts in each case must be considered, including residential ties with Canada and length of time, object, ...Residential Ties In Canada · Subsection 250(1)... · Other Deemed Residents
[25]
RDR3: Statutory Residence Test (SRT) notes - GOV.UK
Jan 22, 2020 · You'll be UK resident for the tax year if you spend 183 days or more in the UK in the tax year. 3.2 Second automatic UK test. You'll be UK ...Sufficient ties test at RFIG20500 · Automatic UK tests at... · RFIG21000 · RFIG20000
[26]
Residency – the 183-day test | Australian Taxation Office
Jun 26, 2025 · The 183-day test is one of the tests used to determine if you are a resident of Australia for tax purposes. Last updated 26 June 2025.
[27]
Residency – the domicile test - Australian Taxation Office
Jun 26, 2025 · The domicile test is one of the tests used to determine if you're a resident of Australia for tax purposes. Last updated 26 June 2025.
[28]
Determining your residency status - Canada.ca
Jan 21, 2025 · For an official residency determination, complete Form NR73. Complete Form NR73 to get CRA 's opinion on whether you would be considered a ...Residency status determination · Income Tax Folio S5-F1-C1 · Form NR74
[29]
Tax on your UK income if you live abroad: If you're a UK resident
You can live abroad and still be a UK resident for tax, for example if you visit the UK for more than 183 days in a tax year.
[30]
Your tax residency | Australian Taxation Office
### Summary of Australia's Tax Residency Tests
[31]
United States income tax treaties - A to Z | Internal Revenue Service
Jan 3, 2025 · The treaties give foreign residents and U.S. citizens/residents a reduced tax rate or exemption on worldwide income.
[32]
Tax Harmonization in Europe and U.S. Business - Tax Foundation
The trend of tax exemptions on tips, overtime, and bonuses may sound like a win for workers, but it is a shortsighted fix with long-term drawbacks. 11 min read.Missing: residency treaties visa
[33]
NHR Portugal Tax Regime 2025: A Guide to Non Habitual Residency
In this article, you'll learn more about these changes and also find out more about: What is the NHR Portugal tax regime? Is the NHR regime still available?