Introduction to Residency Under U.S. Tax Law

 

Although the immigration laws of the United States refer to individuals who are not U.S. citizens as immigrants, nonimmigrants, and undocumented aliens, the tax laws of the United States refer only to resident and nonresident aliens.

In general, the controlling principle is that resident aliens are taxed in the same manner as U.S. citizens on their worldwide income, and nonresident aliens (with certain narrowly defined exceptions) are subject to federal income tax only on income derived from sources within the United States and/or income that is effectively connected with a U.S. trade or business.

The residency rules for tax purposes are found in Internal Revenue Code § 7701(b). If you are not a U.S. citizen, you are considered a resident alien, if you meet one of two tests for the calendar year (January 1 – December 31). 

  1. You are admitted to the United States as, or change your status to, a lawful permanent resident under the immigration laws (the Green Card Test), or
  2. You meet the Substantial Presence Test (which is a numerical formula which measures days of presence in the United States).

Note. Under the Internal Revenue Code, even an undocumented alien who meets the Substantial Presence Test will be treated for tax purposes as a resident alien.

In some cases, you may choose to override the result of the Green Card Test and/or the Substantial Presence Test by:

  1. Making the "First-Year Choice" to be treated as a resident alien for at least part of the year of arrival,
  2. Choosing with your U.S. citizen or resident alien spouse to be treated as a U.S. resident,
  3. Claiming a closer connection to a foreign country, or
  4. Qualifying as a resident of a foreign country under its laws and being eligible to be treated, and claiming treatment, as a resident of the foreign country under the residency tie-breaker rules of an income tax treaty between that country and the United States.

References/Related Topics

Note: This page contains one or more references to the Internal Revenue Code (IRC), Treasury Regulations, court cases, or other official tax guidance. References to these legal authorities are included for the convenience of those who would like to read the technical reference material. To access the applicable IRC sections, Treasury Regulations, or other official tax guidance, visit the Tax Code, Regulations, and Official Guidance page. To access any Tax Court case opinions issued after September 24, 1995, visit the Opinions Search page of the United States Tax Court.