The United
States is a country that taxes all citizens and residents on their worldwide
income. However, in order to be deemed a US resident for tax purposes
(notwithstanding an income tax treaty), one must either have a green card or
satisfy the “substantial presence test.”
The
substantial presence test is a cause of confusion for many, since most people
mistakenly believe that as long as they remain in the US for less than “six
months and a day,” (183 days), they will not be treated as a US resident for
tax purposes. Unfortunately, they are mistaken because the 183 day test
calculates residency status by utilizing a weighted formula outlined below:
1) 100% of
the days in which you were present in the US during the current year; plus
2) 1/3 of
the days in which you were present in the US during the preceding year; plus
3) 1/6 of
the days in which you were present in the US during the second preceding year.
Thus, if
you are a non-citizen who spends exactly 183 days in the US for three
consecutive years, you will eventually be taxed in the US on your worldwide
income. Pursuant to the weighted calculation, the highest number of days you
can spend in the US for three consecutive years without being deemed a resident
for tax purposes is 122. For example:
2017:
122 days * 1 = 122 days; plus
2016:
122 days * 1/3 = 40.67 days; plus
2015:
122 days * 1/6 = 20.33 days.
In this
example, the total weighted days for 2017 is 183 (122 + 40.67 + 20.33), and would not lead one to be deemed a US
resident for tax purposes.
Please
do not hesitate to contact Morris Law Group should you have any questions about
the confusing 183 day residency test.
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