Resident Alien vs Nonresident Alien: Tax Differences Explained for 2025 

According to IRS Publication 519, aliens are considered nonresidents of the United States unless they meet the Green Card test or the Substantial Presence test — but the difference between resident and nonresident alien status can mean thousands of dollars in tax savings or obligations. Resident aliens follow the same tax laws as U.S. citizens and report worldwide income, while nonresident aliens are only taxed on U.S.-sourced income with limited deductions. 

The distinction between resident alien and nonresident alien status determines your entire U.S. tax obligation structure. Resident aliens gain access to all the same deductions, credits, and tax benefits as U.S. citizens, often resulting in lower effective tax rates than many expect. Nonresident aliens face more limited tax obligations but also restricted access to tax benefits. 

How to Determine Your Tax Residency Status 

Green Card Test 

You’re considered a resident alien if you are a lawful permanent resident of the United States at any time during the calendar year. This status continues until: 

• You voluntarily give up your green card 
• Your green card is administratively revoked 
• You’re determined to be a resident of another country under a tax treaty 

Substantial Presence Test 

You meet the substantial presence test if you’re physically present in the U.S. for at least 183 days during a three-year period using this formula: 

• All days present in the current year, plus 
• 1/3 of the days present in the first year before the current year, plus 
• 1/6 of the days present in the second year before the current year 

Example: In 2025, Maria was present for 120 days. In 2024, she was present for 120 days (120 ÷ 3 = 40). In 2023, she was present for 120 days (120 ÷ 6 = 20). Total: 120 + 40 + 20 = 180 days. She doesn’t meet the test. 

Substantial Presence Test Exceptions: 

• Students on F, J, M, or Q visas (first 5 years for students, first 2 years for teachers/researchers) 
• Diplomatic personnel 
• Professional athletes competing in charitable events 
• Individuals with medical conditions preventing departure 

Tax Obligations: Resident vs Nonresident Aliens 

Resident Alien Tax Requirements 

• Income Reporting: Must report worldwide income from all sources
• Forms: File Form 1040 (same as U.S. citizens)
• Tax Rates: Subject to the same progressive tax brackets as U.S. citizens
• Deductions: Full access to standard and itemized deductions
• Credits: Eligible for all tax credits, including the Child Tax Credit 

Benefits Available: 

• Standard deduction ($15,000 for single filers in 2025) 
• Personal exemptions and dependency deductions 
• IRA and 401(k) contribution eligibility 
• Education credits and deductions 
• Earned Income Tax Credit (if eligible) 

Nonresident Alien Tax Requirements 

• Income Reporting: Only U.S.-sourced income is subject to tax
• Forms: File Form 1040-NR
• Tax Rates: 
  • Effectively Connected Income: Same graduated rates as residents 
  • Fixed, Determinable, Annual, Periodic (FDAP) income: Flat 30% rate (or lower treaty rate) 

Limited Deductions: 

• Only deductions connected to U.S. income-producing activities 
• No standard deduction (with limited exceptions) 
• Limited itemized deductions 

Example: Carlos, a nonresident alien, earned $50,000 from a U.S. job and $30,000 from investments in Mexico. He only reports and pays U.S. tax on the $50,000 U.S. income. 

Income Sourcing Rules 

U.S. Source Income (Taxable for Nonresidents) 

• Wages for services performed in the U.S. 
• Interest from U.S. payers 
• Dividends from U.S. corporations 
• Rental income from U.S. real estate 
• Capital gains from U.S. real property 
• Business income from U.S. operations 

Foreign Source Income (Not Taxable for Nonresidents) 

• Wages for services performed outside the U.S. 
• Interest from foreign payers 
• Dividends from foreign corporations 
• Rental income from foreign real estate 
• Capital gains from foreign property (with exceptions) 

Special Situations and Elections 

Dual-Status Tax Year 

If your status changes during the year, you may have a dual-status tax year: 

• File as a nonresident for part of the year 
• File as a resident for the remaining part 
• Different rules apply to each portion 
• Special dual-status return required 

First-Year Choice Election 

If you don’t meet the substantial presence test for the current year but will meet it for the following year, you can choose to be treated as a U.S. resident for part of the current year. 

Requirements: 

• Present for at least 31 consecutive days in the current year 
• Present for at least 75% of days from the 31-day period through year-end 
• Will meet the substantial presence test in the following year 

Closer Connection Exception 

Even if you meet the substantial presence test, you can still be treated as a nonresident if: 

• You’re present for fewer than 183 days in the current year 
• You maintain a tax home in a foreign country 
• You have a closer connection to that foreign country 
• You file Form 8840 by the due date 

Tax Treaty Benefits 

Many countries have tax treaties with the U.S. that can: 

• Reduce withholding rates on certain income 
• Provide exemptions for specific income types 
• Determine residency for treaty purposes 
• Prevent double taxation 

Foreign Asset Reporting Requirements 

For Resident Aliens 

• FBAR: Required if foreign accounts exceed $10,000 
• Form 8938: Required if assets exceed $50,000 (single) or $100,000 (married) at year-end 
• Same reporting thresholds as U.S. citizens 

For Nonresident Aliens 

• FBAR: The Same $10,000 threshold applies 
• Form 8938: Generally not required unless engaged in U.S. trade or business 
• Limited reporting obligations 

Common Scenarios and Examples 

Scenario 1: H-1B Worker 

• Status: Likely resident alien after first year (substantial presence test)
• Tax Impact: Worldwide income taxation, access to all deductions and credits
• Strategy: Optimize foreign tax credits for home country taxes 

Scenario 2: Student on F-1 Visa 

• Status: Nonresident alien for the first five calendar years
• Tax Impact: Only U.S. income is taxed, with limited deductions
• Strategy: Claim treaty benefits if available, plan for resident status transition 

Scenario 3: Green Card Holder Living Abroad 

• Status: Resident alien regardless of physical presence
• Tax Impact: Worldwide income reporting required
• Strategy: Use FEIE and foreign tax credits to minimize U.S. tax 

Key Deadlines and Filing Requirements 

Resident Aliens: 

• April 15: Tax return due date 
• Same extensions available as U.S. citizens 
• Quarterly estimated tax payments, if needed 

Nonresident Aliens: 

• April 15: If wages are subject to withholding or a U.S. business 
• June 15: If no wages are subject to withholding 
• Form 4868 is available for extensions 

Avoiding Common Classification Mistakes 

Don’t Assume Visa Type Determines Tax Status 

Your immigration status doesn’t always match your tax status. Many visa holders become resident aliens for tax purposes before getting permanent residency. 

Don’t Ignore the Substantial Presence Test 

Track your days carefully. Even short trips can push you over the threshold and change your tax obligations entirely. 

Don’t Overlook Treaty Benefits 

Tax treaties can provide significant benefits for both residents and nonresidents. Review your home country’s treaty with the U.S. 

Getting Professional Help 

Determining your correct tax status and obligations requires careful analysis of your specific situation. The difference between resident and nonresident treatment can significantly impact your tax liability and compliance requirements. 

Greenback is an American company founded in 2009 by US expats for US expats. We have always focused exclusively on helping Americans and foreign nationals with their international tax situations. Many of our CPAs and Enrolled Agents work with people across all visa types and residency statuses—from foreign nationals just arriving in the US to Americans who’ve been abroad for decades. 

Here’s our commitment: We’ve helped over 23,000 people through every type of tax situation while maintaining a 4.9-star average on TrustPilot. We’re proud of our high repeat client rates and the level of consistency required to prepare accurate tax returns for clients in 190+ countries. Whether you’re determining your status for the first time or have complex multi-year situations, we have the expertise to help. 

Next Steps 

If you need to determine your correct tax status and obligations: 

1. Calculate Your Days: Track your physical presence in the U.S. carefully 
2. Review Your Visa Status: Consider both immigration and tax implications 
3. Assess Treaty Benefits: Review your home country’s tax treaty with the U.S. 
4. Plan Your Strategy: Optimize your tax position based on your status 
5. Get Expert Guidance: Status determination affects your entire tax strategy 

No matter how complex your tax status situation may be, you’ll have peace of mind knowing that your classification and tax obligations were determined correctly. We’re here to help whether you’re just figuring out your status or have been filing for years. 

If you’re ready to be matched with a Greenback accountant, click the get started button below. For general questions about tax status determination or working with Greenback, contact our Customer Champions — we help people at every stage of their U.S. tax journey. 

This article provides general information about resident and nonresident alien tax status. Tax laws can be complex and change frequently. For advice specific to your situation, consult with a qualified tax professional.