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Why Does US Tax Residency Status Matter?

Non-residents for tax purposes are subject to different rules, and must complete different income tax returns than US resident taxpayers. Non-residents do qualify for some tax exemptions, but are not eligible for other exemptions and benefits available to US residents. For example, with a few exceptions, nonresidents for tax purposes cannot claim tax deductions for their accompanying spouse and children nor can they claim a “Standard Deduction,” which is an additional amount by which US residents for tax purposes can reduce the tax they owe.  On the other hand, US residents for tax purposes must declare and pay taxes on their “world-wide” income, including any salaries, investments, or other income earned in their home country.  So, you need to know your tax residency status before you can correctly complete an income tax return.

Residency for tax purposes is not the same as residency for immigration purposes. Tax residency status is based on a calculation that takes into account visa classification and days of presence in the United States. The Internal Revenue Service (IRS) uses the “substantial presence test" to determine tax residency status. However, F-1 and J-1 students, and J-1 professors and research scholars, and their accompanying F-2 or J-2 dependents, are automatically considered “nonresidents for tax purposes,” for specific periods of time.  F-1 and J-1 students (and F-2/J-2 dependents) are considered “nonresidents for tax purposes,” and cannot count their days of presence toward meeting the “substantial presence test” for any part of their first five calendar years in the US.  J-1 non-students are considered “non-residents for tax purposes” for any part of the first two years of presence in the US. 

To help us guide you toward appropriate tax assistance, please complete our "Worksheet to Determine Tax Residency Status" on the "Tax Resources" page.