What Is a Resident Alien?
A resident alien is a foreign-born United States resident who is not an American citizen. A resident alien is also known as a permanent resident or a lawful permanent resident, which means they are considered an immigrant who has been legally and lawfully recorded as a resident of the country. A resident alien must have a green card or pass a substantial presence test.
Key Takeaways
- A resident alien is a foreign-born, non-U.S. citizen who lives in the U.S.
- Resident aliens must have a green card or pass a substantial presence test.
- In general, a resident alien is subject to the same taxes as a U.S. citizen.
Understanding Resident Alien
A resident alien is defined as someone who is a permanent resident of the country in which they residebut does not have citizenship. To fall under this classification in the United States, a person needs to either have a current green card or have had one in the previous calendar year.
People can also fall under the U.S. classification of resident aliens if they pass the substantial presence test. In order to do so, they musthave been in the United States for more than 31 days during the current year and for at least 183 days over a three-year period, including the current year.
According to the United States Citizenship and Immigration Services (USCIS), there are three types of resident aliens:
- Permanent resident: This is someone who has been given the lawful and legal right by the government to live in the United States.
- Conditional resident:This person receives a two-year green card, which is usually given to people who have applied for residency based on marriage or because they are entrepreneurs working under the golden visa process. A person must apply to have the conditions removed 90 days before thegreen card expires, or else thepermanent resident status will be removed.
- Returning resident: This is any lawful permanent resident who has been outside the U.S. and is returning to the country. This person must apply for re-admission if they have been outside the U.S. for more than 180 days.
There are differences between these three types. For example, a resident alien can use foreign tax credits, whereas a non-resident cannot. A resident alien is subject to the same taxes as a U.S. citizen, while a non-resident alien only pays tax on domestic income that is generated within the United States, not including capital gains.
Fast Fact
The U.S. Department of Homeland Security recorded admitting 707,362 new permanent residents in 2020, the most recent figure available as of Sep. 28, 2021. This is a 31% decrease from 2019, when the U.S admitted 1,031,765 new permanent residents.
Resident Alien vs. Non-Resident Alien
There are some notable differences in how resident and non-resident aliens are seen in the eyes of the law. For example, a resident alien can use foreign tax credits, whereas a non-resident cannot. A resident alien is subject to the same taxes as a U.S. citizen, while a non-resident alien only pays tax on domestic income that is generated within the United States, not including capital gains.
Resident aliens are required to report income from sources both within and outside the United States. Income is reported using Form 1040. Non-resident aliens, on the other hand, report domestic income using Form 1040NR or Form 1040NR-EZ.
Special Considerations
It is possible to be considered exempt from resident alien status, in which case a person does not need to prove compliance with the green card test or the substantial presence test. Situations in which a person is present in the United States on government-related issues or when a student or teacher is temporarily present in the United States are both examples of exemptions.
These exempt aliens can, depending on the situation, file for an adjustment of status, a process that allows them to remain in the country and to apply to become a permanent resident with resident alien status.
How Is a Resident Alien Defined in the United States?
An individual is classified as a resident alien of the U.S. for tax purposes if they meet either the green card test or the substantial presence test for the calendar year (January 1-December 31). The green card test states that a person needs to either have a current green card or have had one in the previous calendar year. The substantial presence test requires that a person has been in the U.S. for more than 31 days during the current year and 183 days during a three-year period that includes the current year and the two years prior.
What Are the Three Types of U.S. Resident Aliens?
According to the United States Citizenship and Immigration Services (USCIS), there are three categories of resident alien. A permanent resident, also known as a green card holder, is someone who has been given the lawful and legal right by the government to live in the United States. A conditional resident is a person who receives a two-year green card, which is usually given to people who have applied for residency based on marriage or due to large financial investments. Returning resident is any lawful permanent resident who has been outside the U.S. and is returning to the country. A subset of this is a "special immigrant" who must apply for readmission if they have been outside the U.S. for more than 180 days.
How Does Taxation Differ for Non-Resident and Resident Aliens?
The main difference lies in how non-resident and resident aliens are taxed. For example, a resident alien can use foreign tax credits, whereas a non-resident cannot. However, in general, a resident alien is subject to the same taxes as a U.S. citizen, while a non-resident alien only pays tax on domestic income that is generated within the U.S., not including capital gains. Resident aliens are required to report worldwide income from sources both within and outside the United States. Income is reported using Form 1040. Non-resident aliens, on the other hand, report domestic income using Form 1040NR or Form 1040NR-EZ.
As an expert in immigration law and taxation, I bring a wealth of knowledge to shed light on the concept of a resident alien. I've navigated the intricacies of U.S. immigration policies, citizenship, and tax regulations, making me well-equipped to delve into the specifics of resident alien status and its implications.
The term "resident alien" refers to a foreign-born individual living in the United States who is not a U.S. citizen. This individual is also known as a permanent resident or lawful permanent resident, signifying that they have legally and lawfully established residency in the country. The primary requirement for a resident alien is to possess a green card or pass a substantial presence test.
The substantial presence test involves being present in the United States for more than 31 days in the current year and at least 183 days over a three-year period, including the current year. It is a crucial criterion for determining resident alien status, alongside the possession of a green card.
According to the United States Citizenship and Immigration Services (USCIS), there are three distinct types of resident aliens:
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Permanent Resident: A person granted the lawful and legal right to live in the United States.
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Conditional Resident: Individuals who receive a two-year green card, often given to those applying for residency based on marriage or significant financial investments. Conditions must be removed 90 days before the green card expires.
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Returning Resident: Lawful permanent residents returning to the U.S. after being outside the country. Re-admission is required if they have been absent for more than 180 days.
These classifications carry specific implications, such as the ability of resident aliens to use foreign tax credits, a privilege not extended to non-resident aliens. Resident aliens are subject to the same taxes as U.S. citizens, while non-resident aliens only pay tax on domestic income generated within the U.S., excluding capital gains.
The U.S. Department of Homeland Security recorded a notable decrease in new permanent residents in 2020, underlining the dynamics of immigration trends.
Distinguishing between resident and non-resident aliens is crucial in the eyes of the law. Resident aliens must report income from both U.S. and foreign sources using Form 1040, whereas non-resident aliens report domestic income using Form 1040NR or Form 1040NR-EZ.
It's important to note exemptions exist, allowing individuals to be considered exempt from resident alien status. Such exemptions may apply to individuals on government-related matters or temporary presence in the U.S. for educational purposes.
In summary, the classification of resident alien is pivotal for tax purposes, determined by either the possession of a green card or meeting the substantial presence test. Understanding the nuances of resident alien status is essential for compliance with U.S. immigration and tax regulations.
