Spending too much time in the United States can make a non-US person a US tax resident, even when they are not a US citizen or don’t have a long-term visa. If they meet the Substantial Presence Test, they will be taxed on their worldwide(!) income for that time period.

Typically, non-residents only pay US taxes on any income they make in the US. But when someone without US citizenship or green card meets the Substantial Presence Test, not only their US-sourced income, but their worldwide income becomes subject to US taxation. They also must comply with FATCA rules like FBAR reporting of non-US bank accounts.

So, it is important to understand the Substantial Presence Test and how to avoid becoming a US tax resident.

Who does the Substantial Presence test apply to?

The Substantial Presence Test applies to any non-US citizen and non-green card holder who spends sufficient time in the United States. This includes people with temporary work or business visas, such as H-1B, EB-5, or B1/B2, or even no visa at all!

So, your tax residency status doesn’t have to match your immigration status.

The defining factor is how many days you spend in the United States in a three-year period. Let’s see how to count the days correctly for this test.

How to calculate days for the Substantial Presence Test

The Substantial Presence Test looks at a three-year period, consisting of the calendar year in question, plus the two prior years.

A non-US person meets the test when they spend:

  • At least 31 days in the United States in the calendar year in questions, and
  • At least 183 days in the US in the calendar year and the two preceding years, using the following equation:
    • All days of the calendar year in questions
    • 1/3 of the days present in the US in the year prior
    • 1/6 of the days present in the US two years prior.

Substantial Presence Test calculation examples

Example 1: Let’s say you spent 60 days in the States in 2024, 120 days in 2023, and 120 days in 2022:

  • 60 days for 2024
  • 1/3 of 120 days = 40 days for 2023
  • 1/6 of 120 days = 20 days for 2022

60+40+20 = 120 days over the three-year period. This does not meet the Substantial Presence Test.

Example 2: Let’s say you spent 120 days in the US in 2024, 150 days in 2023, and 180 days in 2022:

  • 120 days for 2024
  • 1/3 of 150 days = 50 days for 2023
  • 1/6 of 180 days = 30 days for 2022

120+50+30 = 200 days over the three-year period, which exceeds the 183-day threshold of the Substantial Presence Test.

Many people, especially digital nomads, believe they only become tax residents if they spend more than 183 days a year in a country. As example 2 shows, even when you don’t exceed 183 days in any of the calendar years in question, you can still be considered a US tax resident.

Luckily for some US visitors, there are exceptions.

Exceptions to the Substantial Presence Test

The IRS allows two key exceptions to avoid becoming a US tax resident when spending more days in the US.

  • Exempt individuals
  • Closer connection

The first exception refers to the purpose of the foreigner’s stay in the Unites States. The second depends on the ties to your home country despite spending much time in the US. We explain both below.

In addition, a tax treaty tie breaker could help dual residents to avoid becoming a US tax resident. More on this later.

Exempt individuals’ exception

Certain visa holders, such as qualifying students, teachers, or diplomats, may be exempt from counting days under the Substantial Presence Test.  

Exemptions are available for:

  • Students on an F, J, M, or Q visa.
  • Teachers, professors, or trainees on a J or Q visa.
  • Foreign-government related individuals on specific A or G visas (not all A and G visas qualify).
  • Professional athletes temporarily in the US for certain events.

However, they can claim an exemption only for those days that they qualify as “exempt individual”. They must still count the days that don’t fall into the exempt categories.

So, if you spent time in the States with a non-exempt visa before or after becoming an exempt individual, those non-exempt days still count towards the substantial presence.

Typically, there is a time limit on how many years students or teachers can claim exempt status.

Individuals may also be able to exclude days when they were unable to leave the US because of medical reasons.

To claim any exemption, you must file IRS Form 8843, Statement For Exempt Individuals and Individuals With A Medical Condition. You can only exclude those days from the Substantial Presence Test calculation if you file Form 8843.

Closer connection exception

The closer connection exception recognizes that ties such as family, business, and personal relationships may tie an individual more closely to their home country than to the United States. When an individual can establish a closer connection to a foreign country, despite meeting the Substantial Presence Test, they can avoid becoming a US tax resident. They must meet the following requirements:

  • Spend less then 183 days in the US in a calendar year.
  • Have a tax home in another country for that entire year.
  • Have a closer connection to that other country.
  • File IRS Form 8840 on time to claim the status.

If you don’t file Form 8840 timely, you likely won’t be able to claim the status later.

Having a closer connection to another country goes beyond mere physical presence and involves maintaining significant ties in the form of family, social, economic, or business relationships.

It’s essential to document and be able to demonstrate these ties, so you can provide evidence to the IRS that your primary connections and interests are rooted in a country other than the United States. Be aware that you can’t claim closer connection to another country once you applied for a green card.

What if you meet the Substantial Presence Test?

So, you spent too many days in the United States and meet the presence test. What are the consequences?

As a US tax resident, the IRS can tax you on your worldwide income. This means that you must file a US tax return where you disclose your income, any companies you have or have a stake in, and more.

You will also have to disclose all non-US bank accounts if the combined value exceeds $10,000 in a year (FBAR), and potentially other financial assets if their value exceeds certain thresholds (IRS form 8938). An experienced US tax accountant can advise you on your US tax filing obligations.

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