Substantial Presence Test CALCULATOR

U.S. Tax Residency Rules Under the Internal Revenue Code

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The concept of “residency” in U.S. federal income taxation is governed not by immigration law or by colloquial notions of domicile but by the Internal Revenue Code and its accompanying Treasury Regulations. As a result, an individual may be a “resident alien” for tax purposes even while remaining a nonimmigrant under immigration law, and vice-versa. Treasury Regulations §§ 301.7701(b)-1 through-7 establish a comprehensive statutory-residency framework built around the green card test, the substantial presence test, and a series of modifying rules such as the closer-connection exception, exempt days, and treaty tie-breaker provisions.
Because the substantial presence test (“SPT”) serves as the primary mechanism through which non-citizens become U.S. tax residents, this article focuses primarily on its mechanics and exceptions.

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I. The Statutory Definition of a Resident Alien

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Treas. Reg. § 301.7701(b)-1(a) provides that an alien individual is a U.S. resident for any calendar year in which the person meets either: (1) the lawful permanent residence test, or (2) the substantial presence test. The green card test is comparatively straightforward: an individual becomes a resident for tax purposes on the first day they are present in the United States as a lawful permanent resident, unless residency is suspended by treaty under Treas. Reg. § 301.7701(b)-7.

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By contrast, the substantial presence test is a numerical day-counting regime codified in IRC § 7701(b)(3) and elaborated in Treas. Reg. § 301.7701(b)-1(c). It operates independently of immigration classifications and can convert tourists, students, digital nomads, and long-term business visitors into U.S. residents based solely on physical presence.

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II. The Substantial Presence Test (SPT)

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A. The General Rule. Under Treas. Reg. § 301.7701(b)-1(c)(1), an alien individual meets the substantial presence test for a calendar year if two independent conditions are satisfied:

1. The 31-Day Requirement:
   The individual must be present in the United States for at least 31 days during the current year.

2. The 183-Day Weighted Formula:
   The sum of the following must equal or exceed 183 days:

   • All days of presence in the current year,

   • 1/3 of the days of presence in the preceding year, and

   • 1/6 of the days of presence in the second preceding year.

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This three-year weighted lookback formula ensures that both current-year and accumulated multi-year presence can cause residency, even if the individual has not historically resided in the United States.

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B. Definition of a “Day of Presence”.  Treas. Reg. § 301.7701(b)-1(c)(2) provides that a “day of presence” is counted for any day during which the individual is physically present in the United States at any time. Even a few minutes in U.S. territory can count unless an exclusion under Treas. Reg. § 301.7701(b)-3 applies. Partial days, presence in territorial waters, and airport layovers where the traveler is free to enter the United States may constitute days of presence.

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C. Effect of Meeting the Test. If the individual satisfies the SPT, the individual is treated as a resident alien for the entire calendar year, absent an applicable exception. This default full-year residency is subject to critical modifications under Treas. Reg. § 301.7701(b)-4, which allows “dual-status” treatment when residency begins or ends mid-year.

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III. Exceptions and Modifiers to the Substantial Presence Test

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The regulations include several sophisticated exceptions designed to prevent unintended residency, to coordinate U.S. law with global mobility, and to ensure fairness for individuals with closer connections outside the United States.

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A. Exempt Individuals and Excluded Days (Treas. Reg. § 301.7701(b)-3). Not all days physically spent in the United States count toward the substantial presence test. Section 301.7701(b)-3 identifies exempt individuals whose days of presence are excluded when determining residency. These include:

• Certain diplomats and foreign government employees,

• Teachers or trainees temporarily present under “J” or “Q” visas,

• Students temporarily present under an “F,” “J,” “M,” or “Q” visa, and

• Professional athletes competing in charitable sporting events.

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However, exempt status is not automatic; it generally requires that the individual substantially comply with the terms of their visa and not have taken steps toward permanent residency.

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In addition to exempt individuals, Treas. Reg. § 301.7701(b)-3 also excludes days under narrowly tailored scenarios, including days of transit between two foreign points, days during which a medical condition prevents the individual from leaving the United States, and days in which a regular commuter from Canada or Mexico crosses the border.

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B. The Closer Connection Exception (Treas. Reg. § 301.7701(b)-2). Even if the weighted 183-day threshold is met, an individual may still avoid U.S. residency by establishing a closer connection to a foreign country. Under Treas. Reg. § 301.7701(b)-2(a), an alien individual who:

1. is present in the United States for fewer than 183 days during the current year (not the weighted formula, but the literal count of days),

2. maintains a tax home in a foreign country, and

3. demonstrates a closer connection to that foreign country based on the nonexclusive factors enumerated in Treas. Reg. § 301.7701(b)-2(d),

will not be treated as a U.S. resident.

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Relevant factors include the location of the individual’s family, possessions, social and political affiliations, business activities, drivers’ license, and permanent home. This exception is not available to individuals who have applied for permanent residency (i.e., filed Form I-485 or Form DS-230).

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C. Coordination With Treaties (Treas. Reg. § 301.7701(b)-7). Where a bilateral income tax treaty includes a tie-breaker residency article, an individual who qualifies as a resident under U.S. domestic law may nonetheless be treated as a nonresident by invoking the treaty. Treas. Reg. § 301.7701(b)-7 provides the mechanism for such individuals to claim nonresident status under a treaty’s residency provisions, but the individual must file a valid Form 8833 and is generally treated as a nonresident for all Code purposes except those specifically preserved.

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Thus, treaty residency overrides the substantial presence test where applicable, though it may impact the individual's status for other legal purposes, including access to certain tax elections.

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IV. Residency Starting and Ending Dates

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A. Residency Start and End Rules (Treas. Reg. § 301.7701(b)-4). The general rule treats a resident as taxable for the entire calendar year. However, for individuals who acquire residency mid-year—whether by obtaining a green card or satisfying the SPT – Treas. Reg. § 301.7701(b)-4(a) establishes a dual-status year in which only the period beginning on the first day of tax residency is treated as resident-period income.

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Similarly, when residency ends, the individual may transition back to nonresident status as of the last day they cease to satisfy either the green card test or the SPT. Special elections allow for limited alignment of residency periods for married couples, but the default rule is strictly day-based.

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B. Taxable Year (Treas. Reg. § 301.7701(b)-6). This regulation clarifies that residency determinations are always tied to the calendar year. Even individuals using a fiscal tax year for foreign tax purposes are bound to the U.S. calendar-year framework for determining residency.

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V. Coordination With Expatriation Rules. 

 

Treas. Reg. § 301.7701(b)-5 coordinates tax residency determinations with IRC § 877 and the expatriation regime. In general, once an individual relinquishes a green card or otherwise ends U.S. residency, the expatriation rules govern the tax consequences of departure. The regulation ensures that abandonment of residency for immigration purposes aligns with residency termination for tax purposes unless treaty claims or other statutory rules apply.

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VI. Practical Effects of Becoming a U.S. Tax Resident. 

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The consequence of satisfying the substantial presence test—and not qualifying for any exception—is profound: the individual becomes a U.S. income tax resident, subject to tax on worldwide income, required to file Form 1040, and generally obligated to report foreign financial assets under the same rules that apply to U.S. citizens. Foreign tax credits, treaty provisions, and specialized reporting rules may mitigate double taxation, but the change in status carries significant compliance obligations.

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U.S. tax residency is determined through a complex but internally coherent statutory regime that emphasizes objective presence-based criteria. The substantial presence test stands at the center of this structure, converting physical presence into tax residency through a weighted formula, while carefully-tailored exceptions—such as the closer connection exception, exempt-individual rules, and treaty provisions—introduce flexibility to avoid inequitable results. Understanding these rules is essential for non-citizens who spend significant time in the United States, as inadvertent residency can lead to comprehensive worldwide taxation and significant reporting obligations.