Whether you are considered a U.S. tax resident is determined by the Internal Revenue Service (IRS) based on your status as either a lawful permanent resident (green card holder) or by meeting the substantial presence test.
The substantial presence test is met if you are physically present in the U.S. for at least 31 days during the current year and 183 days during the current year and the two preceding years, counting all the days of physical presence in the current year, one-third of the days in the first preceding year, and one-sixth of the days in the second prior year.
If you meet either of these criteria, you are generally considered a U.S. tax resident and subject to taxation on your worldwide income. It is important to note that even if you do not meet the substantial presence test, you may still be considered a resident for tax purposes if you have a considerable connection to the U.S. and meet certain other criteria.
What is mean a substantial connection?
A substantial connection to the U.S. is a term used to describe particular ties that an individual has to the U.S. that may result in them being considered a U.S. tax resident, even if they do not meet the substantial presence test. These ties are determined based on a facts and circumstances analysis and may include:
- Having a permanent home in the U.S.
- Having a spouse or children who are U.S. citizens or residents.
- Maintaining substantial economic interests in the U.S.
- Spending a significant amount of time in the U.S. during the year
- Having a closer connection to the U.S. than any other country
If you have a substantial connection to the U.S., you may be considered a U.S. tax resident and subject to taxation on your worldwide income, even if you do not meet the substantial presence test.
At Legacy Counsel, we provide assistance and guidance regarding your U.S. tax residency status. If you have inquiries or require further information on this matter, we invite you to schedule a complimentary 15-minute free call.
