If you’re moving to the United States or spending a significant amount of time there, it’s important to understand how your physical presence can affect your tax status. The Substantial Presence Test (SPT) is a calculation used by the Internal Revenue Service (IRS) to determine whether a non-citizen is considered a resident alien for tax purposes. Meeting this test means you are taxed like a US citizen.
How Does the Substantial Presence Test Work?
The Substantial Presence Test calculates the number of days you have been physically present in the United States over a three-year period. To meet the test, you must be present in the US for at least:
- 31 days during the current year, and
- 183 days during the three-year period that includes the current year and the two years immediately before that.
The 183-day requirement is calculated as follows:
- All days you were present in the current year.
- One-third of the days you were present in the previous year.
- One-sixth of the days you were present in the year before that.
An Example Calculation
Let’s say you are calculating your presence for the tax year 2025:
- Days present in 2025: 120
- Days present in 2024: 150
- Days present in 2023: 180
The calculation would be:
- 120 (current year) + 50 (1/3 of 150) + 30 (1/6 of 180) = 200 days
Since the total is more than 183 days, you would meet the Substantial Presence Test and be considered a resident alien for tax purposes in 2025.
Exceptions to the Substantial Presence Test
There are several exceptions to consider:
- Exempt Individuals: Some visa holders (like students on F or J visas) and foreign government employees may be exempt from counting days.
- Closer Connection Exception: If you can demonstrate a closer connection to a foreign country and maintained a tax home there, you may not be treated as a resident despite meeting the SPT.
- Medical Condition Exception: Days you were present in the US solely due to a medical condition that arose while you were there may not count.
Why Does the Substantial Presence Test Matter?
If you meet the Substantial Presence Test, you are treated as a resident alien for tax purposes, which means you must report your worldwide income on a US tax return. Failing to properly determine your status can lead to unexpected tax liabilities and penalties.
Final Thoughts
The Substantial Presence Test can be complex, especially with exemptions. Understanding how it works is crucial to determining your tax residency status.
The information in this blog post is for general informational purposes only and does not constitute professional tax advice. We strongly recommend consulting a qualified tax professional before making any decisions. US Expat Tax Advisor is not liable for any actions taken based on this content.
If you would like more information or want to schedule a one-on-one consultancy call, please get in touch using our contact form.
