US Tax Guide for Dual-Status Aliens

Filing taxes can be a confusing process for anyone. For Americans filing as dual-status aliens, things only become more complicated. Fortunately, you don’t have to figure it out on your own.

In this guide, we’re going to look at what you need to know about taxes for dual-status aliens.

What Is a Dual-Status Alien?

A dual-status alien is a person who is considered both a resident and non-resident of the US within the same tax year. This usually happens when a non-US citizen moves to or from the US.

For example, let’s say Sofia is a Mexican citizen. In June of 2021, she obtained a visa and moved to the US, where she remained for the rest of the year. Because she was a non-resident for the first half of the year and a resident for the second half, she would be considered a dual-status alien for tax year 2021.

To understand whether you’re a dual-status alien—and how you will be taxed if you are—let’s look at the differences between residents and non-residents.

What Is the Difference Between a US Resident and Non-Resident?

A resident alien is a non-US citizen that is considered a lawful resident of the United States. To qualify as a resident alien, you must either have a Green Card or qualify under the Substantial Presence Test. At its most simple form, the Substantial Presence Test requires that you meet both of these standards:

  • You spent more than 30 days in the US during the current year
  • You spent a total of at least 183 days in the US over the current year and the two previous years

However, not every day spent in the US will count equally towards those numbers. The math can get complicated. Consult a qualified tax professional to learn more.

What about non-residents? Well, being a non-resident simply means that you aren’t a resident. If you do not meet the standards of the Substantial Presence Test and you do not have a Green Card, you will be considered a non-resident for tax purposes.

How Are US Residents Taxed?

US resident aliens are taxed on their worldwide income. Most forms of income are taxed at the same progressive rates regardless of the source (e.g., salary, wages, self-employment income, etc.)

Below, you can see the US income tax rates for single residents.

  • $0 – $10,275 – 10%
  • $10,276 – $41,775 – 12%
  • $41,776 – $89,075 – 22%
  • $89,076 – $170,050 – 24%
  • $170,051 – $215,950 – 32%
  • $215,951 – $539,900 – 35%
  • $539,900 and over – 37%

In addition to the income tax, self-employed residents must also pay a self-employment tax. This tax covers the Social Security and Medicare contributions that would typically result from an employer-employee relationship.

Residents file their taxes using IRS Form 1040: US Individual Income Tax Return. They may use a variety of filing statuses depending on their personal situation, such as:

  • Single
  • Married filing jointly
  • Married filing separate
  • Head of household
  • Qualifying widow(er) with dependent child

These filing statuses can open the door to certain tax benefits.

How Are US Non-Residents Taxed?

Now let’s look at how non-resident taxes differ from taxes for residents.

First, unlike resident aliens, non-resident aliens are taxed on only their US-source income. Most forms of US-source income are taxed at the same progressive rates as resident income. However, certain forms of passive income are taxed at a flat rate of 30%. This includes:

  • Interest
  • Dividends
  • Rents
  • Royalties

Non-residents are not required to pay the self-employment tax.

When filing US taxes, non-residents must use one of the two following forms:

  • IRS Form 1040NR: US Nonresident Alien Income Tax Return
  • 1040NR-EZ: U.S. Income Tax Return for Certain Nonresident Aliens with No Dependents

Non-residents generally do not have the option of choosing a more favorable filing status. Many tax credits available for residents are also unavailable for non-residents.

How Are Dual-Status Aliens Taxed?

As a dual-status alien, you are considered both a resident and a non-resident in the same year. This means that you will have to file two tax returns, one for each status.

  • Use Form 1040 to report your worldwide income for the part of the year you were considered a resident
  • Use Form 1040NR (or Form 1040NR-EZ) to report your US-source income during the part of the year when you were considered a non-resident

One of these will be your main form, while the other will serve as an “informational attachment.” Your main form is determined by whether you were a resident or non-resident at the end of the year.

  • If you were a U.S. resident at the end of the tax year, you will file Form 1040 with Form 1040-NR as an informational attachment
  • If you were a non-resident at the end of the tax year, then you must file a 1040-NR with Form 1040 as an informational attachment

Can Dual-Status Aliens File a Joint Return?

In most cases, a dual-status alien cannot file a joint return with their spouse. However, there is an exception to this if all of the following apply:

  • You were considered a non-resident at the beginning of the year
  • You were considered a resident at the end of the year
  • You were married to a US resident at the end of the year

If each of these is true, you and your spouse can elect to file a joint return as residents—even if both of you would otherwise be dual-status aliens. The tradeoff is that your income for the entire year will be taxed at resident rates, even for the portion of the year when you were a non-resident. However, you will also be allowed to claim certain tax benefits unavailable to non-residents.

Consult a qualified tax professional to learn the best choice in your case.

What If I’m Behind on Filing My US Expat Taxes?

Every US citizen is required to file an annual US tax return no matter what country they live in. However, many Americans living overseas are unaware of this tax obligation.

If you’re one of the countless expats who didn’t know they had to file a US tax return, don’t panic. The IRS provides an amnesty program to help expats come into compliance without facing any penalties. It’s known as the Streamlined Filing Compliance Procedures.

To use this program, all you have to do is:

  • Self-certify that your failure to file was an accident, not a willful refusal
  • File the last three delinquent income tax returns and pay any delinquent taxes you owed during that time (with interest)
  • File Foreign Bank Account Reports (FBARs) for the last six years

This will bring you into compliance with IRS regulations.

Get Reliable Help from an Expat Tax Specialist

We hope this guide has helped you understand how taxes work for dual-status aliens. If you still have questions, we have answers. In fact, we can even help you prepare and file your expat taxes on your behalf.

At Greenback Expat Tax Services, we help Americans living abroad manage their US tax obligations. Just contact us, and we’ll be happy to help you in any way we can.

Learn more about our services and flat-fee pricing to file your US expat taxes.