Staying a Nonresident for Tax Purposes

Foreign nationals living in the United States face unique challenges when it comes to taxes. Unlike immigration status, which is determined by visas or green cards, your tax residency depends on how long you’ve stayed in the U.S. If you don’t plan carefully, you could unknowingly trigger U.S. tax residency and face obligations to report and pay taxes on your worldwide income. Understanding the rules and filing requirements can help you maintain nonresident status and minimize your U.S. tax liability.

Why Your Tax Residency Matters

For tax purposes, individuals in the U.S. are classified as either residents or nonresidents. Tax residency determines the scope of your U.S. tax obligations. Nonresidents are typically taxed only on U.S.-source income, while residents must report and pay taxes on all income, including foreign earnings. If you wish to stay a nonresident, your goal is to avoid meeting the substantial presence test (staying under 183 day) which is how the IRS determines tax residency for foreign nationals who do not have a green card.

Steps to Preserve Nonresident Status

1. Track Your Days in the U.S.: Maintain a precise record of every day you are physically present in the country. Keep in mind that even partial days count.

   
   

2. File the Necessary Documentation: To claim nonresident status, you may need to submit certain forms annually to the IRS. These forms demonstrate that you do not meet the substantial presence test or that you qualify for an exemption.

   
   

3. Understand Exemptions: Certain categories of individuals, such as students, teachers, or diplomats, may be exempt from counting days toward the substantial presence test. Check if you qualify for such an exemption.

   
   

4. Avoid Unnecessary Extended Stays: Plan your trips to the U.S. carefully to avoid unintentionally exceeding the day limit that would trigger residency.

   
   

Why You Might Want to Stay a Nonresident

Remaining a nonresident has significant tax advantages. You will only be taxed on your U.S.-source income, such as wages earned in the U.S., and not on income from other countries. This can help you avoid double taxation and complex reporting requirements for foreign bank accounts or investments.

If you’re unsure about your tax residency or need assistance preparing the required forms to maintain your nonresident status, MKHS Tax Group is here to help. Contact us at info@mkhstaxgroup.com for expert guidance tailored to your situation.