US tax rules for resident and nonresident aliens: a complete guide
Whether you hold a Green Card, spend part of the year stateside, or simply earn occasional US income, your tax status – resident or non-resident alien – sets the ground rules, especially for tax purposes.
If you’re a foreign employee, student, freelancer, or retiree with US ties, this guide delivers the essentials without legalese. Scan the key takeaways below, then dive deeper to file with confidence.
- Status hinges on the Green Card or substantial-presence tests.
- Resident aliens owe tax on worldwide income; non-residents owe tax only on US-source income.
- File by April 15 if wages were withheld – or June 15 if none were – to avoid penalties and lost deductions.
Resident vs. non-resident alien – what it means
If you're living or earning in the US but aren’t a citizen, you’re generally classified as either a resident or non-resident alien for tax purposes. In plain English, a resident alien is taxed like a US citizen, while a non-resident alien only pays tax on certain types of US income.
Tax obligations difference between resident and non-resident aliens
| Tax obligation | Resident alien | Non-resident alien |
|---|---|---|
| Income subject to tax | Worldwide income | Only US-source income |
| Tax forms used | Standard 1040 forms | Form 1040-NR |
| Deductions and credits | Most federal tax benefits are allowed | Limited – some treaty-based exceptions |
| Filing deadline | April 15 (or later with extension) | June 15 if no wage income |
| Withholding rules | Same as US citizens | Often 30% flat rate unless treaty applies |
Understanding these differences is key to staying compliant – and avoiding costly mistakes. See a deeper breakdown of the rules and requirements in our full resident vs. non-resident alien guide – especially useful if you're a non US citizen trying to navigate your first federal tax filing.
How to discover your residency status
-
The Green Card Test
If you hold a green card anytime during the year, you’re considered a resident for tax purposes. You must report global income on your tax return. -
The Substantial Presence Test
Even without a green card, you might still qualify as a resident based on your days in the US. If you meet the formula threshold, you’ll file a resident tax return. -
Counting Days – the 183-Day Rule
Add all US days this year, one-third of last year, and one-sixth from two years ago. If the total hits 183, residency rules may apply.
Wondering if these exceptions apply to you? Some visa holders like students or diplomats may be exempt from counting certain days.
Medical conditions or short layovers can also change your status. Use caution – the wrong assumption could trigger non-resident income tax filing or the wrong tax form.
Tax rules for resident aliens – what to know
Resident aliens are treated much like US citizens when it comes to federal tax rules – meaning they’re taxed on their worldwide income, not just what’s earned within the United States. But the rules get trickier when deductions, forms, and treaty eligibility come into play. Here’s how it all breaks down.
What income is taxed
If you’re classified as a resident alien, you’re required to report all sources of income – regardless of where it was earned. This includes:
→ Wages and salaries from US and foreign employers
→ Interest, dividends, rental income, and royalties
→ Capital gains and freelance earnings, including income, reported on 1099 forms
Unlike those considered non-resident for tax purposes, resident aliens don’t get a pass on overseas earnings – the IRS wants full transparency.
Deductions and credits available
The good news? Resident aliens qualify for nearly all of the same deductions and credits as US citizens. That means you can reduce your tax return liability by claiming:
- The standard deduction (or itemized, if it’s higher)
- Child tax credit, education credits, and earned income credit
- Contributions to US-based retirement accounts (if eligible)
Additionally, if you’ve paid foreign taxes on the same income, you may be able to use the foreign tax credit to avoid double taxation – a benefit nonresident filers can’t typically access.
Filing requirements and key forms
Resident aliens must file using Form 1040, just like US citizens. You’ll also need to report all income on the appropriate schedules – including any 1099 forms received for investment or self-employment earnings.
If you’re switching from non-resident for tax purposes to resident alien status in a given year, you may need to file a dual-status tax return – part-year as a nonresident, part-year as a resident. This situation can be complex, and it’s wise to get professional guidance to avoid overpayment or missed credits.
If you’re owed a tax refund as a non-resident from the portion of the year you were taxed as a non-resident, it’ll be processed separately from your resident return – assuming both filings are done correctly.
NOTE! For most resident aliens, meeting the IRS requirements is about timing, documentation, and understanding the nuances of worldwide income. Compared to a nonresident tax return, the rules are broader – but also more beneficial when used strategically.
Tax rules for nonresident aliens
Filing taxes as a nonresident alien can feel like assembling IKEA furniture without a manual – but once you understand the key income categories and rules, the process starts to make sense.
Know what’s taxable – and how
The IRS doesn’t tax all income equally for nonresidents. Your income typically falls into one of two buckets:
| Income type | Description | Tax treatment |
|---|---|---|
| Effectively Connected Income (ECI) | Wages, self-employment, or business income connected to US activities | Taxed at graduated rates |
| Fixed, Determinable, Annual, Periodic (FDAP) | Passive income (interest, dividends, royalties, etc.) | Flat 30% withholding unless reduced by treaty |
Understanding this split is key when you're navigating a tax return as a nonresident. Not all income is created equal in the IRS’s eyes.
Withholding isn’t optional
If you're a nonresident with FDAP income – think interest or US dividends – 30% of that gets withheld automatically, unless a tax treaty says otherwise. For ECI, regular tax brackets apply, and yes – employers typically withhold those too.
Received a 1099? That may signal untaxed passive income that still needs reporting.
Tax treaties can save you money
The US has treaties with over 60 countries. Depending on your visa and residency, you may qualify for:
- Reduced or zero withholding on FDAP income
- Exclusion of certain earnings from your non-resident income tax obligations
- Relief from double taxation
Treaties are a hidden weapon in optimizing your tax return – but only if you claim them correctly.
You may still need to file
Even if you didn’t earn wages in the US, you might still need to file a nonresident tax return. Here’s when filing is required:
- You earned any ECI (like US self-employment income)
- You have FDAP income that wasn't fully withheld
- You want to claim a tax refund
- You were on an F, J, M, or Q visa (even with no income)
Filing & compliance – smooth sailing
Choosing the correct form shapes how the IRS views your year. If you meet the residency tests, you’ll file the standard Form 1040 to report worldwide income. Otherwise, a 1040-NR captures your nonresident alien tax filing obligations and limits taxation to US-source earnings.
Imagine a tech worker who gains American citizen status mid-year – dual-status rules let him file one 1040-NR for pre-naturalization months and attach a resident statement for the balance.
For 2024 income, calendar-year filers with wages must submit a tax return by April 15 2025, while those without wages have until June 16 2025. Miss the deadline and the failure-to-file penalty racks up at 5% per month, capped at 25% – with a $510 minimum after 60 days.
Even if you file on time, unpaid balances trigger a 0.5% monthly late-payment charge (plus interest on unpaid tax, currently 7% for Q3 2025) until settled.
Tips to avoid common mistakes
- Double-check visa days to confirm if a nonresident tax return or resident form applies.
- Use treaty rates to reduce non-resident income tax withholding where eligible.
- Attach Form 8843 if you claimed any exempt days under the substantial-presence test.
- File Form 4868 by April 15 – or use our free tax extension service – to push the paperwork deadline to October 15 2025, though it doesn’t delay payment.
Expert tax help – starts right now
Resident or nonresident, choosing the right form determines how much of your income the IRS touches. Understanding tests, deadlines and penalties keeps surprises – and costs – at bay.
Our specialists are on call to guide you through every compliance step so you can meet every requirement. From selecting the precise form to hitting each deadline, we keep you audit-proof.
