Closer Connection Exception
A provision allowing a non-citizen who would otherwise be a US tax resident under the Substantial Presence Test to remain a non-resident if they have a closer connection to a foreign country.
Detailed Explanation
Filed on Form 8840 with a US tax return, the closer connection exception requires the taxpayer to be present in the US for fewer than 183 days in the current year, maintain a tax home in a foreign country during the entire year, and have a closer connection (family, social, economic ties, voter registration, etc.) to that foreign country than to the US. Particularly relevant for cross-border professionals splitting time between the US and another country.
Key Points
- Lets someone who meets the Substantial Presence Test avoid US residency by proving stronger foreign ties.
- Three requirements: fewer than 183 days in the US this year, a tax home abroad all year, and a closer connection to that country.
- Closer connection is shown by family, home, belongings, banking, voting, and social ties.
- Claimed by filing Form 8840 with (or as) the US return.
- Not available if the taxpayer has applied for, or taken steps toward, a green card.
Practical Example
A consultant spends 150 days in the US during the year but keeps her home, family, bank accounts, and business abroad. Although under 183 current-year days, the weighted three-year test makes her a US resident. She files Form 8840 to claim the closer connection exception, demonstrating her tax home and stronger ties remain in her home country, and avoids worldwide US taxation.
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Learn about International TaxationRelated Terms
Substantial Presence Test
A US tax residency test under IRC Section 7701(b) treating a non-citizen as a US tax resident if they meet a specific weighted day-count of physical presence in the United States.
Tax Treaty
A bilateral agreement between the United States and a foreign country that allocates taxing rights and provides benefits to reduce or eliminate double taxation on cross-border income.
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