United States — Tax: Tax Residency

Why this matters

Understanding US tax residency can help individuals avoid unexpected tax liabilities or take advantage of tax benefits.

Key facts

• The test is met by presence on at least 31 days in the current year and at least 183 days across the current year and the two before it.
• The 183 days are all days in the current year, plus one-third of the days in the first prior year, plus one-sixth of the days in the second prior year.
• IRS example: 120 days in each of 2023, 2024 and 2025 gives 120 + 40 + 20 = 180 days, so the person is not a resident for 2025.
• Days as an exempt individual and certain Canada or Mexico commuting days are not counted.
• Closer connection exception: present fewer than 183 days in the current year, a tax home in a foreign country, a closer connection to it, and a timely Form 8840.
• Resident aliens are taxed on worldwide income; nonresident aliens are taxed on US-source income.

Steps

1. Determine Whether You're a US Tax Resident — Calculate your total days in the US over the past three years, including days spent in transit. If you meet the Substantial Presence Test, you're likely a US tax resident. Consider consulting a tax professional to ensure you're meeting the correct criteria.

Common mistakes

• Counting only current-year days: the prior two years count at one-third and one-sixth.