Contrary to popular myth, you don't need to have a green card in order to owe taxes to the U.S. government.
U.S. immigration laws often refer to citizens of another country as "aliens," whether or not they are lawfully present in the United States. However, the terms "resident alien" and "non-resident alien" come from a different source entirely: they are actually terms from the federal tax laws. The main difference is that resident aliens owe tax on all their worldwide income, while non-resident aliens owe tax only on income generated from U.S. sources.
As you become better acquainted with these definitions, you'll realize that, contrary to popular myth, you don't need to have a green card in order to owe taxes to the U.S. government.
What Is a Resident Alien?
There are two tests for whether federal tax law classifies someone as a resident alien:
The Green Card Test for Resident Alien Tax Classification
This applies to someone who has U.S. permanent or conditional residence, or a green card. The person is a citizen of another country who is authorized to live and work in the U.S. on a permanent basis (or, in the case of a conditional resident, for two years that might then be continued into a permanent stay).
By the very nature of the requirements placed upon U.S. permanent residents, they spend most of their time living in the United States. To keep your green card, you must not make your primary home in another country and "abandon" your residence, nor remain outside the U.S. for more than one year.
(People who plan to remain outside the United States for more than one year can, however, apply for a re-entry permit before leaving, in order to preserve their green card.)
The Substantial Presence Test for Resident Alien Tax Qualification
Even without having a green card, a person who spends 31 days in the United States during the current year and 183 days during a three-year period that includes the current year and the two years immediately before that is considered a resident alien.
This affects many people who are in the U.S. on temporary, otherwise known as nonimmigrant visas.
There are various exemptions to this tax obligation, such as for time people spent in transit (less than 24 hours in the U.S.), time during which the person couldn't leave because of needing medical treatment, as well as teachers and students (on an F, J, M, or Q visa) who haven't stayed in the U.S. beyond a certain period of time.
What Is a Non-Resident Alien?
If you are spending some time in the U.S., but do not meet (or are exempt from) either the green card or the substantial presence tests, then you are most likely a non-resident alien. Visiting students and teachers are often classified as non-resident aliens in the early years of their U.S. stay.
For more details on these definitions, see IRS Publication 519, U.S. Tax Guide for Aliens.
Tax Implications
If you are a resident alien, your U.S. tax obligations are much the same as those of a U.S. citizen. You must report all your worldwide income to the IRS, even if you remain outside the United States for an entire year.
If you are a non-resident alien, your tax obligation to the U.S. government is reduced. You'll even use a different tax form than the regular Form 1040, and be taxed at different rates than resident aliens and citizens. You'll owe tax only on income that was generated within the U.S, not including any capital gains. And you might also be able to take advantage of some international treaty exemptions.
FAQs
Resident aliens generally are taxed on their worldwide income, similar to U.S. citizens. A non-resident alien is a lawful permanent resident of the U.S. at any time if they have been given the privilege, according to the immigration laws, of residing permanently as an immigrant.
Am I a resident or nonresident alien for tax purposes? ›
If you are not a U.S. citizen, you are considered a nonresident of the United States for U.S. tax purposes unless you meet one of two tests. You are a resident of the United States for tax purposes if you meet either the green card test or the substantial presence test for the calendar year (January 1 – December 31).
Who is a resident alien for income tax purposes? ›
A resident alien is often also called a permanent resident or lawful permanent resident. This means that they are considered an immigrant who is legally and lawfully recorded as a U.S. resident. So, if you're a citizen of another country and you live and work in the United States, you may qualify as a resident alien.
Are you a non resident for tax purposes? ›
There are four tests for determining your residency status for tax purposes. These are “the resides test”, “the domicile test”, “the 183-day test” and “the Commonwealth Superannuation fund test”. If you satisfy the requirements of any of these four tests, then you are considered to be a resident for tax purposes.
Is h1b resident alien or non resident alien? ›
If you meet the substantial presence test and have been in the U.S. on an H-1B visa for the entire calendar year, you are considered a full-year resident for U.S. tax purposes. If you fail the substantial presence test, you are considered a nonresident alien unless you qualify for and make a special election.
How do I know if I am a resident alien or non-resident alien? ›
If a person does not meet either the Green Card or Substantial Presence Test, then that person is classified as a non-resident alien. A new arrival on a J-1 or F-1 visa is generally a non-resident alien.
What is a nonresident alien for tax purposes? ›
The Internal Revenue Service (IRS) considers you a nonresident alien if you are not a lawful permanent resident (Green Card holder) or do not pass their substantial presence test.
What is the difference between resident alien and nonresident alien? ›
Definition of Resident Alien
To be classified as a resident alien, the individual must meet one of two tests: 1. Green Card Test A non-resident alien is a lawful permanent resident of the U.S. at any time if they have been given the privilege, according to the immigration laws, of residing permanently as an immigrant.
Does a non-resident alien need to file a tax return? ›
You must file Form 1040-NR, U.S. Nonresident Alien Income Tax Return only if you have income that is subject to tax, such as wages, tips, scholarship and fellowship grants, dividends, etc. Refer to Foreign Students and Scholars for more information.
Can I use TurboTax if I am a nonresident alien? ›
Although TurboTax doesn't support IRS Form 1040-NR (U.S. Nonresident Alien Income Tax Return), we have partnered with Sprintax to offer both federal and state tax preparation for international students, scholars, and nonresident foreign professionals. Please visit the TurboTax/Sprintax site for more info.
Key Takeaways. Resident aliens legally work and live in the U.S. and may owe U.S. tax on all of their income. Nonresident aliens don't meet the green card or substantial presence tests. A nonresident alien who earns income from U.S. sources must file a return and pay taxes to the IRS.
What tax status should I claim? ›
Generally, you should file your state tax return using the same status as your federal return.
What is a US person for tax purposes? ›
In the case of individuals, a U.S. person means any one of the following: A U.S. citizen. A U.S. lawful permanent resident (i.e., a “green card holder”) An individual who satisfies the substantial presence test (commonly referred to as the “day count test”)
Do nonresident aliens pay more taxes? ›
It is taxed for a nonresident at the same graduated rates as for a U.S. person.
Is F-1 resident alien for tax purposes? ›
Resident Alien Students
Generally, foreign students in F-1, J-1, or M-1 nonimmigrant status who have been in the United States more than 5 calendar years become resident aliens for U.S. tax purpose if they meet the “Substantial Presence Test” and are liable for Social Security and Medicare taxes.
Is H-1B a nonresident? ›
A resident alien is someone who lives in the US but isn't a citizen. So, yes, H-1B visa holders are considered resident aliens who are living and working in the US legally. To learn how to increase your chance of getting the H-1B visa, click here.
How do I know if I am a tax resident? ›
If you've been in New Zealand for more than 183 days in any 12-month period, you're considered to be a New Zealand tax resident from the first of the 183 days. The 183 days don't have to be consecutive.
What is the difference between resident alien and nonresident alien on W4? ›
A Nonresident Alien is taxed differently from a U.S. citizen. A Resident Alien also known as a “Permanent Resident” has been awarded a Permanency Authorization to live and work in the US. Permanent Residents are subject to all income tax reporting and taxation. Q: What is a “W-4”?
Is F-1 a nonresident alien? ›
Your Tax Residency Status
In general, students in F or J status are considered nonresident aliens for tax purposes for the first five calendar years of their stay in the U.S. Scholars in J status are considered nonresident aliens for tax purposes for the first two calendar years of their stay.
