Substantial presence test
An IRS test that determines US tax residency based on physical presence days.
Definition
Substantial presence test under IRC § 7701(b)(3) makes a non-citizen a US tax resident if they meet the day-count formula: 183 days using current year + 1/3 of prior year + 1/6 of year before that. F-1/J-1 students and certain other categories have exemptions.
Context
Determines whether a non-citizen is taxed as US resident (worldwide income) or non-resident (US-source only).
Example
A founder visits the US 120 days each year for 3 years. Day count: 120 + 40 + 20 = 180. Less than 183; not a US tax resident.
Common pitfalls
- Day-count includes partial days.
- Closer-connection exception may apply for under-183-day situations.