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.
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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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