April 25, 2017 - Phil Hodgen

U.S. Resident Status After Expatriation?

Becoming a Tax Resident Again

Sometimes people who expatriate — give up their U.S. citizenship or green cards — want to visit the United States. This might be for business reasons, family reasons, or just to have some fun.

Here’s how to keep that hard-won status of “not a U.S. taxpayer”, even if you return to the United States after expatriating.

Reader C inspired the topic in an email to me:

It was my understanding that once I have given up my citizenship I would be treated like any other foreigner ie I could stay in the US for up to 60 days assuming I had the appropriate visitors visa. I have read somewhere (???) that you can only stay for 30 days each year for the next 10 years following expatriation. Is this true? Can you explain for all of us?

The short answer:

  • The “more than 30 days makes you a resident” rule does not apply to anyone who has expatriated after mid-June, 2008.
  • The normal rules apply to expatriates for deciding whether you are a resident or nonresident of the United States for income tax purposes.
  • The magic number: 121. Spend 121 or fewer days in the United States every year, and you will always safely be a nonresident for U.S. income tax purposes.

The Old “30 Days Makes You a Taxpayer” Rule

The old exit tax law — for expatriations before mid-June, 2008 — had a special rule. For 10 years after you expatriated, the United States would tax you on certain types of income. For all other purposes, you were a foreign person for U.S. tax.

During the 10 years after your expatriation, you could become a U.S. taxpayer again simply by spending more than 30 days in the United States in a calendar year:

This section shall not apply to any individual to whom this section would otherwise apply for any taxable year during the 10-year period referred to in subsection (a) in which such individual is physically present in the United States at any time on more than 30 days in the calendar year ending in such taxable year, and such individual shall be treated for purposes of this title as a citizen or resident of the United States, as the case may be, for such taxable year.1

The “we can tax you for 10 years after you expatriate” rule and the “if you are in the United States for more than 30 days you are a taxpayer again” rules are dead. They do not apply if you renounced your citizenship or gave up your green card after mid-June, 2008.

Let’s ignore those rules. C, you can stay in the United States more than 30 days each year without becoming a U.S. taxpayer (assuming that you expatriated after mid-June, 2008). How many more days than 30 day you stay in the USA? Let’s explore that question next.

The Current Rules: How You Become a Tax Resident

Now that “30 day rule” is dead, life gets simpler. A person who gives up U.S. citizenship or a green card will figure out U.S. tax status — “Am I a resident or nonresident of the USA for income tax purposes” the way that every other noncitizen figures it out.

There are three things that make you a U.S. taxpayer:

  • Citizen. You are a U.S. citizen (this does not apply to a person who expatriated).
  • Green Card. You are a permanent resident (i.e., you have a green card). This does not apply to someone who expatriated, either).
  • Tax Election. You choose to be a U.S. taxpayer by making a special election to be one. I assume you did not do this.
  • Days in the USA. You spend too many days in the United States using a weighted average formula that looks at the last three years. This is the one we care about.

For Expatriates, It’s the Substantial Presence Test

For someone who has expatriated, then, everything depends on how many days you are present in the United States. Control this, and you control your (tax) destiny.

Go to the IRS website for an explanation of how the “count the days” rule works.

Easy Answer: You’re Safe at 121 Days

But as always, we want simple answers. Yes, it’s a three-year weighted average calculation. You have no time for math. You just want the “keep it simple” answer.

Here is the easy answer to your question: 121.

Always limit your stay in the United States to 121 or fewer days in a calendar year. If you do this, you will be a “nonresident alien” and will not be dragged into the U.S. tax system.2

Easy Answer: You’re a Resident at 183 Days

Similarly, there is an easy answer for when you are a resident of the United States for tax purposes: 183 days of presence in the current year makes you a resident.

  1. IRC § 877(g)(1). Emphasis added. 
  2. The substantial presence test asks you to do some simple arithmetic. If the result of your arithmetic is 183 or more, you are a resident. If the result is 182 or lower, then you are a nonresident. Find the explanation of the formula on the IRS website. But here’s the formula and the result. Pretend you are in the United States for exactly 121 days every year. The substantial presence test formula is: (121 + 121/3 + 121/6) = 121 + 40 1/3 + 20 1/6 = 181 1/2. Since the result is under 183, you are a nonresident. 
  3. The easiest of these is to use an income tax treaty to elect to be a nonresident of the United States and a resident of your home country for tax purposes.