🇺🇸 Tax residency in United States

Three hundred sixty-five days. That’s the magic number for most countries, right? Not quite for the US. You can hit US tax residency, and the taxman’s radar, with a lot less time if you’re not careful.

The IRS uses a simple day-count rule for residency: 183 days. But that's just the starting point. If you spend 183 days or more physically present in the US during a calendar year, you’re generally considered a resident alien for tax purposes. This is the "substantial presence test." It counts days based on a formula: all days in the current year, one-third of days in the first year back, and one-sixth of days in the second year back. If that sum reaches 183, boom, you’re in. However, there are exceptions. If you can prove you have a "closer connection" to another country and meet specific criteria, you might avoid residency. This is where things get fuzzy. It’s not just about where you sleep; it’s about where your life is anchored.

What pulls you in even if you’re under that 183-day mark? Owning real estate in the US is a big one. If you have a home you’re using, even part-time, it screams "centre of vital interests." Same goes for your family. If your spouse and kids are living in the US, that’s a massive anchor. And don't even think about registering a business there while you’re spending time in the country; that’s practically an engraved invitation. These aren't just minor points; they can override the day-count rule entirely. The IRS looks at the whole picture.

So, what’s the damage if you trigger US tax residency? Worldwide taxation. That means everything you earn, everywhere in the world, is on the table. For a digital nomad pulling in, say, $80,000 from freelance clients abroad, the US tax bill could sting. The top federal income tax rate hits 37% on income over $609,350 for single filers in 2023 . State taxes add another layer, often between 0% and 13.3%. So that $80k could easily see $15k-$20k+ disappear in taxes, depending on your state. It’s not pocket change.

Now, the special regime. There isn't really one for general tax residency that shelters typical nomad income. The closest thing is the Foreign Earned Income Exclusion (FEIE), but that’s for US citizens or resident aliens working abroad. If you trigger US residency, you generally can’t use FEIE on that US-sourced income, and you’re taxed on your worldwide income anyway. It’s designed to prevent double taxation for those living and working overseas, not to give a pass to people spending significant time stateside. It shelters your foreign earned income if you meet its stringent physical presence tests abroad (either Bona Fide Residence or Physical Presence Test).

For those of you with ties to the UK, Germany, or other countries with tax treaties with the US, things can get complicated. A treaty might override US residency rules if you can prove you’re a tax resident of the treaty country and meet specific conditions. For instance, a UK citizen spending 180 days in the US might still be considered a UK resident for tax purposes if their permanent home is there and they don't have a "permanent establishment" in the US. These are complex, fact-specific analyses. You can't just assume a treaty saves you. You need to meet its "tie-breaker" rules.

When does hiring a local US tax accountant make sense? If you’ve spent more than a few weeks in the US, have any US-based income or assets, or are unsure about your residency status, paying an accountant $300-$600 for an initial consultation can save you thousands in potential penalties and back taxes. They can clarify your specific situation, explain treaty implications, and ensure you file correctly, or even help you establish you're not a resident.

if you're pushing 100 days in the US, start looking very closely at your ties to other countries.

This information is for educational purposes only and does not constitute legal or tax advice.