What is the effective date of US tax residency?

How to determine the effective date for tax residency

Generally speaking, your residency begins on the first day you are present in the US during the year you pass the substantial residence test OR the date you become a lawful permanent resident.

To pass the substantial residence test you must be in the US for:

• • 31 days within the current year AND
  • 183 days during the 3-year period that includes the current year and the 2 years immediately before that, counting:
    • All the days you were present in the current year, and
    • 1/3 of the days you were present in the first year before the current year, and
    • 1/6 of the days you were present in the second year before the current year.

When you become a US tax resident, the exact effective date can be a few days either way. You must report your worldwide income for the year.

Tax Implications of Residency

The US tax system requires you to include all income retroactively for the calendar year if you finish the year as a tax resident or at any point during the year.

This is confirmed in the IRS Form 1040 Instructions

• • If a person qualifies as a resident alien for tax purposes, they must file Form 1040 (U.S. Individual Income Tax Return).
  • The instructions for Form 1040 (available on the IRS website) provide guidance on how to report worldwide income.
  • The instructions specifically state that U.S. residents (including resident aliens) are required to report all sources of income, both from within the U.S. and abroad, on their tax return.

IRS Publication 519 – U.S. Tax Guide for Aliens

• • This publication further clarifies the rules for determining tax residency and provides detailed information on the filing requirements for residents.
  • It states that if an individual meets the criteria for U.S. tax residency, they must report their worldwide income, regardless of whether they were a resident for the full year.