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Substantial Presence Test

Definition:

The substantial presence test is a way to calculate whether a person will be considered a US resident alien for US tax purposes. In order to meet the substantial presence test and be considered a US resident alien (LINK), the person must be  be physically present in the United States on at least:

  • 31 days during the current year, and
  • 183 days during the 3-year period that includes the current year and the 2 years immediately before that, counting:
    • All the days present in the current year, and
    • 1/3 of the days you were present in the first year before the current year, and
    • 1/6 of the days you were present in the second year before the current year.

Example:

A person was physically present in the United States for the following days:

  • 120 days in 2016.
  • 120 days in 2017.
  • 120 days in 2018.

 

To calculate whether this person meets the substantial presence test for calendar year 2018:

  • 2016 —  20 days = 120/6
  • 2017 —  40 days = 120/3
  • 2018 — 120 days 20 + 40 + 120 = 180 days.

 

This person would not be considered a US resident alien under the substantial presence test for 2018, because 180 days is less than 183 days. Days Present in the United States: A person is treated as present in the United States on any day that he or she is physically present in the United States at any time during the day.  For purposes of this test, a person is not treated as present in the United States on any of the following days if he or she:

  • commutes to work in the U.S. from a residence in Canada or Mexico, if he or she regularly commutes from Canada or Mexico.
  • Travels between two places outside of the United States and is present in the United States for less than 24 hours (e.g., a layover between international flights).
  • Is in the United States as a crew member of a non-US (foreign) vessel)
  • Is unable to leave the United States because of a medical condition that develops while he or she is in the United States.
  • An exempt individual (see below).

 

United States: For purposes of this test, the United States includes:

  • All 50 states and the District of Columbia.
  • The territorial waters of the United States.
  • He seabed and subsoil of those submarine areas that are adjacent to U.S. territorial waters and over which the United States has exclusive rights under international law to explore and exploit natural resources. United States does not include U.S. possessions and territories or U.S. airspace.

 

Exempt Individual: Certain individuals do not count their days in the United States for purposes of the substantial presence test.  They are called exempt individuals, not because they are exempt from US tax, but because their days do not count as physically present in the United States.  These exempt individuals include:

  • An individual temporarily present in the U.S. as a foreign government-related individual under an “A” or “G” visa, other than individuals holding “A-3” or “G-5” class visas.
  • A teacher or trainee temporarily present in the U.S. under a “J” or “Q” visa, who substantially complies with the requirements of the visa.
  • A student temporarily present in the U.S. under an “F,” “J,” “M,” or “Q” visa, who substantially complies with the requirements of the visa.
  • Professional athlete temporarily in the U.S. to compete in a charitable sports event.

 

Form 8843: Exempt individuals (for purposes of this test) and persons physically unable to leave the United States because of a medical condition or medical problem,  must include Form 8843, Statement for Exempt Individuals and Individuals With a Medical Condition, with their income tax return.  If these persons do not have to file an income tax return, they must send Form 8843 to the address indicated in the instructions for Form 8843 by the due date for filing an income tax return.  This form is required in order to exclude the days present in the U.S. as an exempt individual or because of a medical condition that arose while you were in the U.S. This rule does not apply if the person can prove, clear and convincing evidence that he or she took reasonable actions to become aware of the filing requirements and significant steps to comply with those requirements. Closer Connection Exception to the Substantial Presence Test: If a person passes the  substantial presence test, he or she can still be treated as a nonresident alien if he or she qualifies for one of the following exceptions; The closer connection exception available to all aliens. The closer connection exception available only to students. Supporting Information:  Publication 519, U.S. Tax Guide for Aliens.