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Residency & Treaty Tax

The year you arrive is the hardest one, and it is the year most preparers get wrong. Once you are a U.S. tax resident, your worldwide income is reportable here — salary, rent, pensions, everything. Treaties can change that, but only if someone claims them properly.

What We Cover

Everything that turns on when you became a U.S. tax resident — and what happens if you stop being one.

The substantial presence test and your residency start date
Arrival-year dual-status returns
First-year choice, and when it is worth making
Electing to treat a nonresident spouse as a U.S. resident
Treaty-based positions and Form 8833 disclosure
Worldwide income once resident — foreign salary, rent, and pensions
Foreign tax credits on Form 1116, and carryforwards
Residency termination and expatriation tax under section 877A

Which return do you file for your arrival year?

Almost everyone who moves to the United States mid-year gets told something different by three different people. The answer turns on a small number of facts.

1

You were present in the U.S. enough days to meet the substantial presence test this year

You are a resident for at least part of the year. The remaining question is whether you are a resident for the whole year or only from your residency start date — which determines whether you file a full-year resident return or a dual-status return.

2

You became a resident partway through the year

A dual-status return is the default: nonresident rules for the period before your start date, resident rules after. Dual-status filers cannot use the standard deduction and cannot file jointly, which is often more expensive than the alternatives.

3

You are married, and one of you is not a U.S. resident

An election under section 6013(g) lets you file jointly and treat the nonresident spouse as a resident for the full year. It usually lowers the bill — but it also makes your spouse's worldwide income and foreign accounts reportable. Worth modelling both ways before choosing.

4

You paid tax to your home country on the same income

A foreign tax credit on Form 1116 relieves the double taxation, subject to per-category limits. Credits you cannot use in the year they arise are generally not lost — they move to other years, in both directions, which turns the planning question from whether you qualify into which year should absorb them.

Common Questions

I moved to the U.S. in the middle of the year. Am I a resident for the whole year?

Usually not automatically. If you meet the substantial presence test, your residency generally starts on the first day you were present in the U.S. that year, and income before that is treated under nonresident rules. Several elections can change this, and the right choice depends on your income mix and marital status.

Does a tax treaty mean I do not pay U.S. tax on my home-country income?

Rarely that simple. Most U.S. treaties contain a saving clause that lets the U.S. tax its own residents as if the treaty did not exist, with specific carve-outs. Claiming a treaty position that survives the saving clause generally requires disclosing it on Form 8833, and an undisclosed position carries its own penalty.

I have a green card but I live outside the U.S. now. Do I still file?

Yes. Green card holders remain U.S. tax residents until the status is formally abandoned or revoked, regardless of where they live. Simply leaving does not end the filing obligation, and long-term holders who do abandon it may face expatriation tax.

What is the exit tax and should I be worried about it?

Section 877A can impose a mark-to-market tax on people who give up citizenship or long-term green card status and exceed certain net worth or tax-liability thresholds. It matters most to people who have held a green card for a long time and are considering leaving. It is far easier to plan for in advance than to unwind afterward.

Get your first U.S. tax year right

The arrival year sets your residency start date, your elections, and your credit carryforwards. Those choices are hard to revisit later.

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This page is not immigration advice

We are tax accountants, not immigration attorneys. Where this page mentions a visa or residency status, it is explaining how that status affects a tax question — not assessing your work authorization, your eligibility, or what any of it means for an application. Those consequences are more serious than tax ones and depend on facts we do not evaluate. Please speak with a licensed immigration attorney before acting on anything that touches your status, and bring us in once you know where you stand.