Understanding the IRS Substantial Presence Test

When it comes to U.S. taxes, your residency status matters as much as your income. Many people think only U.S. citizens and green card holders pay U.S. taxes, but that’s not the whole story. If you spend enough time in the United States, you may also be treated as a resident for tax purposes — even without citizenship or a green card.

The IRS uses the Substantial Presence Test (SPT) to decide when this applies. Let’s break it down.

What Is the Substantial Presence Test?

The Substantial Presence Test is the IRS’s way of determining whether a non-U.S. citizen should be considered a U.S. resident for tax purposes based on how many days they are physically present in the country.

• If you meet the test, you are generally taxed as a U.S. resident alien, meaning the IRS expects you to report your worldwide income.

• If you do not meet the test, you are treated as a nonresident alien, and only your U.S.-sourced income is subject to U.S. tax.

How the Substantial Presence Test Works

You meet the test if you are physically present in the U.S. for:

1. At least 31 days during the current year, and

2. 183 days total during the 3-year period that includes the current year and the two years before it, counted as follows:

   • All the days you were present in the current year, plus

   • 1/3 of the days you were present in the first year before, plus

   • 1/6 of the days you were present in the second year before.

 Example:

• Current year: 120 days in the U.S.

• 1st prior year: 120 days (counted as 40)

• 2nd prior year: 120 days (counted as 20)

• Total = 180 days → You do not meet the test.

If the total was 183 days or more, you would qualify as a tax resident.

Days That Don’t Count

Not every day in the U.S. counts toward the test. The IRS excludes certain days, such as when you are:

• A student, teacher, or trainee on an F, J, M, or Q visa (exempt individuals for a certain number of years).

• A professional athlete competing in a charitable sports event.

• Unable to leave the U.S. due to a medical condition that developed while you were here.

• Present in the U.S. for less than 24 hours while in transit between two foreign locations.

Exceptions to the Substantial Presence Test

Even if you meet the day-count test, you may still avoid being treated as a resident if you qualify for one of these exceptions:

• Closer Connection Exception: You can show that you have a stronger connection to a foreign country (such as maintaining a home, job, or family abroad).

• Tax Treaty Tie-Breaker: If your home country has a tax treaty with the U.S., the treaty rules may allow you to be treated as a nonresident despite meeting the test.

Why the Substantial Presence Test Matters

Your residency status decides how the IRS taxes you:

• Resident aliens: Must report worldwide income (U.S. + foreign).

• Nonresident aliens: Report only U.S.-sourced income (like wages, dividends, or royalties from U.S. companies).

This impacts not only your taxes but also whether you need to file forms like W-9 (for residents) or W-8BEN (for nonresidents).

Practical Tips

• Track your days carefully, even short visits count.

• Keep records of travel, visas, and purpose of stay.

• If you’re close to the 183-day threshold, consider whether a tax treaty or closer connection claim applies.

• When in doubt, seek help from a Certified Acceptance Agent (CAA) who understands cross-border taxation.

Final Thoughts

The IRS Substantial Presence Test is a critical rule for determining tax residency. Crossing the threshold means you move from being taxed like a nonresident (U.S. income only) to being treated like a U.S. resident (worldwide income).

Understanding the formula, the exceptions, and how treaties apply can save you from costly mistakes. And ensure you stay compliant with both U.S. and international tax laws.