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Tax Tips for Resident and Non-Resident Aliens: Part 1

tax tips for resident and non-resident aliens1

Did you know you are required to pay taxes on your income even if you are not an American citizen? The same is true even if you spend some of your time abroad. One important thing to note, however, is the way you are taxed is determined by your alien status. In other words, resident aliens are taxed differently than non-resident aliens. Here’s an overview of tax tips for resident and non-resident aliens, including how each status affects your taxes

Resident vs. Non-Resident Alien Status 

Before figuring out how you will be taxed, you’ll need to figure out which alien status applies to your situation. The first is the resident alien status. This means you were born outside the United States, do not have U.S. citizenship, but you live in the country. It also means you have satisfied the requirements of one of two IRS tests. These are the green card test or the substantial presence test. The second status is the non-resident alien status. This status is granted to those who do not satisfy the requirements of the green card test or the substantial presence test. 

Green Card Test 

The green card test is fairly simple. If the U.S. Citizenship and Immigration Service grants you a green card, you satisfy the requirements of this test and are considered a resident alien.  

Substantial Presence Test 

The substantial presence test is a little more complicated. It is for those who do not have a green card but meet both of the following requirements: 

  • Spent at least 31 days in the United States during the current tax year 
  • Spent at least 183 days in the United States during the last three tax years (including the current tax year) 

How to Count Number of Days Present 

When counting days, you may count all the days you were in the country in the current year. However, you may only count 1/3 of the days you were present in the year prior to the current year and only 1/6 of the days you were present in the second year prior to the current year. Let’s look at an example. Assume you were present in the country for 120 days in 2023, 180 days in 2022, and 150 days in 2021. Your total number of days present in the U.S. would be 205 days according to the following calculations: 

  • 120 days for 2023 
  • 60 days for 2022 (1/3 of 180) 
  • 25 days for 2021 (1/6 of 150) 

This means you’d meet the minimum of 183 days in the United States. Therefore, you’d be considered a resident alien for tax purposes in 2023. However, keep in mind that there are several days that should be excluded from your count, including: 

  • Days you regularly commuted to work in the U.S. from Mexico or Canada 
  • Days you pass through the U.S. for less than 24 hours because you are in transit between two places outside the U.S.
  • Days you are in the U.S. as a crew member on a foreign vessel 
  • Days you are unable to leave the U.S. due to a medical condition that developed while in the U.S. 
  • Days you are considered an exempt individual   

Exempt Individuals

You are considered an exempt individual for a day if you meet any of the following criteria: 

  • You are temporarily in the U.S. as a foreign government-related individual under an “A” or “G” visa, excluding “A-3” and “G-5” class visas 
  • You are a teacher or trainee who is temporarily in the U.S. under a “J” or “Q” visa and comply with the visa requirements 
  • You are a student who is temporarily in the U.S. under an “F,” “J,” “M,” or “Q” visa and comply with the visa requirements 
  • You are a professional athlete who is temporarily in the U.S. to compete in a sporting event for charity 

Going back to our previous example, if we were to exclude 30 days that you spent in the U.S. working as a crew member on a foreign vessel in 2023, your new count would be 175. Because the excluded days reduced your count below the 183-day minimum, you would be considered a non-resident alien for tax purposes in 2023.  

Tax Help for Resident and Non-Resident Aliens 

It’s clear that determining your alien status for tax purposes can get complicated. If you’re still unsure about your status after reading our tax tips for resident and non-resident aliens, you can consult a tax professional for clarification. Optima Tax Relief is the nation’s leading tax resolution firm with over a decade of experience helping taxpayers with tough tax situations. 

If You Need Tax Help, Contact Us Today for a Free Consultation