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For non-US citizens and non-Green Card holders, the Substantial Presence Test is the definitive and often complex rule that determines whether they are a “resident alien” for US tax purposes. Passing this test transforms your tax obligations from a focus on US-sourced income to one that includes your worldwide income.
At TheTaxBooks, we understand that for international professionals, investors, and students, this test is more than just a formula; it’s a critical factor that requires careful planning. This guide goes beyond the basics to provide a comprehensive, expert-level understanding of this crucial tax rule.
The Substantial Presence Test is a mathematical formula used by the IRS to classify an individual’s tax residency status based on physical time spent in the United States. To meet the test for any given calendar year, you must satisfy two conditions:
The three-year calculation is not a simple sum. It uses a weighted formula to give more importance to days in the most recent years. The calculation is as follows:
Example: Let’s calculate for the year 2025 based on the following travel history:
Calculation:
Since your total of 220 days is greater than the 183-day threshold, you meet the Substantial Presence Test and would be considered a resident alien for the entire 2025 tax year.
The “days present” for the test are not as simple as they may seem. While any part of a day counts as a full day, certain exceptions apply:
Exempt Individuals: Days spent in the US by certain individuals with specific visa types are not counted. We will discuss this in detail below.
The consequences of meeting the Substantial Presence Test are significant, fundamentally altering how you are taxed by the IRS.
The obligation to report worldwide income as a resident alien also triggers critical international information reporting requirements, such as FBAR (Foreign Bank Account Reporting) and FATCA (Foreign Account Tax Compliance Act) filings. TheTaxBooks specializes in assisting international clients with these complex reporting obligations.
A common scenario for those who meet the Substantial Presence Test is a “dual-status” tax year. This occurs in the year you either arrive in or depart from the US and are considered a non-resident for part of the year and a resident for the other part.
Fortunately, even if you meet the 183-day threshold, you may still be able to maintain your non-resident status by qualifying for a key exception.
This exception is designed for individuals who meet the day count but have a demonstrably stronger connection to a foreign country. To qualify, you must:
The IRS evaluates “closer connection” based on a range of factors, including:
To claim this exception, you must file Form 8840, Closer Connection Exception Statement for Aliens, with the IRS. Note that you are ineligible to use this exception if you have a Green Card or have taken steps to apply for one.
Certain visa holders are considered “exempt individuals” and their days of presence in the US do not count toward the Substantial Presence Test. This is a critical provision for students and researchers. Categories include:
To claim this exception, you must file Form 8843, Statement for Exempt Individuals and Individuals With a Medical Condition, with the IRS, regardless of whether you are required to file a tax return.
To learn more about how you can reduce your taxes and save money, check out the helpful resources on our blog or contact us today to schedule a consultation.
