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.
Detailed Explanation
A non-US person is a US tax resident if they are physically present in the US for at least 31 days in the current year AND a weighted total of 183 days over the current year plus one-third of the prior year days plus one-sixth of the second prior year days. Tax residents are taxed on worldwide income just like US citizens. The Closer Connection Exception (Form 8840) and treaty tie-breaker rules can override the substantial presence result. Days in transit, days as a student or teacher on F/J/M/Q visas, and certain medical days are excluded.
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Learn about International TaxationRelated Terms
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.
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.
Form 8833 (Treaty-Based Position Disclosure)
The required disclosure form when a taxpayer claims a US tax treaty benefit that overrides or modifies an internal Revenue Code provision, with $1,000 (individual) or $10,000 (corporation) penalty per failure.
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