Resident Alien

What Is a Resident Alien?

In United States tax law, "alien" is the official term for anyone who is not a US citizen or national. A resident alien is a non-citizen whom the Internal Revenue Service (IRS) treats as a US tax resident for a given year. This status matters because US residents are generally taxed on their worldwide income, while nonresident alien individuals are generally taxed only on income from US sources and certain income connected with US business.

The term is about income tax, not immigration status, although the two are related.

How Status Is Determined

A non-citizen can become a resident alien under either of two main tests:

• The green card test: the person is a lawful permanent resident, meaning they hold a green card at any time during the calendar year.
• The substantial presence test: the person is physically present in the US for enough days over a three-year period. Days in the current year count fully, while days in the two prior years count for less.

Someone who meets the substantial presence test may still be treated as a nonresident if they have a closer connection to another country and file the required statement. A tax treaty between the US and another country can also contain tie-breaker rules when both countries claim a person as a resident.

Why It Matters

A resident alien generally files on the same forms as US citizens and reports income from all sources, including foreign accounts and investments. Residents may be able to claim a foreign tax credit for income taxes paid to other countries, which can reduce double taxation.

Status can change during the year. A person may be a nonresident for part of the year and a resident for the rest, which is called a dual-status year and has its own filing rules. Because the rules are detailed, people with cross-border finances often rely on a tax professional to confirm their status.