183 Day Residency Test

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.