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.
Key Points
- Two-part test: at least 31 days in the current year AND a weighted 183 days over three years.
- Weighting: all current-year days + 1/3 of prior-year days + 1/6 of second-prior-year days.
- Meeting the test makes a non-citizen a US tax resident, taxed on worldwide income.
- Excluded days: transit, certain medical conditions, and exempt individuals (students/teachers on F/J/M/Q visas).
- Can be overridden by the Closer Connection Exception (Form 8840) or a treaty tie-breaker.
Practical Example
A visitor spends 120 days in the US in each of three consecutive years. The weighted count is 120 + (120/3) + (120/6) = 120 + 40 + 20 = 180 days, just under 183, so he is NOT a US tax resident. One more visit pushing the current year to 130 days would cross the threshold and make him a resident taxed on worldwide income.
Related TS CPA Service
US tax returns and foreign asset reporting for Americans abroad, foreign nationals in the US, and anyone holding offshore accounts or entities.
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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