U.S. Income Tax for Foreign Students and Teachers

The taxation of foreign students and teachers in the United States depends largely on their residency status for tax purposes. This status correlates to some general aspects of residency status for immigration purposes, but for U.S. income tax purposes, persons who are not U.S. citizens are considered to be resident or nonresident aliens. The fundamental principle is that resident aliens are subject to tax on their worldwide income, in the same way as U.S. citizens. Nonresident aliens are generally subject to U.S. income tax only on income derived from sources in the United States and/or income that is effectively connected with a U.S. trade or business.

Resident or Nonresident for Tax Purposes

There are three ways in which a foreign student or teacher could be considered a U.S. resident for U.S. income tax purposes:
1. the green card test,
2. the physical presence test, or
3. the special first-year election.

The green card test is satisfied, and you are considered a resident for tax purposes, if you have been lawfully admitted into the U.S. under the immigration laws, have permanent resident status with a green card, and spend at least one day in the United States during the year.

You satisfy the physical presence test if you are physically present in the United States on at least 31 days during the current year, and a total of 183 days during the 3-year period including the current year and the 2 prior years. In counting these 183 days, you include all the days you were physically present in the current year, 1/3 of the days last year, and 1/6 of the days the year before last.

Under the special first-year election, a nonresident who spends at least 31 days in a row in the U.S., at least 75% of the days from the start of that 31-day period until the end of the year in the U.S., and satisfies the physical presence test the following year, can choose to be treated as a resident for U.S. tax purposes in the first year.

Tax Treaties