US Tax Guide for Dual-Status Aliens

The tax code is full of nuances—and so are the rules for filing taxes as dual-status aliens. If you make mistakes when filing your taxes as a dual-status alien, you could end up paying more than necessary or missing out on valuable deductions and credits. 

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 2023, 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 the 2023 tax year.

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 foreign individual who is legally recognized as a resident of the United States. To be classified as a resident alien, you must either possess a Green Card or satisfy the conditions of the Substantial Presence Test. In its simplest terms, the Substantial Presence Test necessitates the fulfillment of these two criteria:

1. You have spent over 30 days in the US in the current year.
2. You have spent at least a cumulative total of 183 days in the US during the current year and the preceding two years based on a specific formula.

However, bear in mind that each day spent in the US may not carry the same weight in this calculation – it can become complex.

On the flip side, what defines non-residents? Essentially, they are individuals who are not residing in the country during a tax year. If you fail to meet the standards of the Substantial Presence Test and do not hold a Green Card, you will be classified as a non-resident for tax purposes.

How Are US Residents Taxed?

US resident aliens are taxed on their worldwide income in the same way as US citizens are taxed. 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 2024 US income tax rates for single residents. 

• $0 – $11,600– 10% 
• $11,600 – $47,150 – 12% 
• $47,150 – $100,525 – 22% 
• $100,525 – $191,950 – 24% 
• $191,950 – $243,725 – 32% 
• $243,725 – $609,350 539,900 – 35% 
• $609,350 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 typically resulting from an employer-employee relationship.

Residents file their taxes using IRS Form 1040: US Individual Income Tax Returns. They may be filed using 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 use form 1040-NR.

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 tax year. 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 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 US resident at the end of the tax year, you would 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 that might 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.

Dual-Status Tax Filing Doesn’t Have to Be Complicated

We hope this guide has helped you understand how taxes work for dual-status aliens. If you still have questions, we have answers. Contact us, and one of our customer champions will be happy to help. If you need very specific advice on your specific tax situation, you can also click below to get a consultation with one of our expat tax experts.