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Alien - Exempt Individual Examples
Summary: Examples of how to determine tax residency for individuals exempt from completing the Substantial Presence Test (SPT) are provided below.

Example 1 - J1 Scholar Status

A visitor was a citizen and resident of India just prior to his arrival in the United States. He is a research scholar in chemical engineering. He arrived in the United States on 08-29-2007 on a J-1 visa and plans to be in the United States until August 25, 2009. Assuming he has not changed to another immigration status, his tax residency for 2009 would be determined as follows.

  • Step 1: What rule should be applied for a J-1 Scholar?
         Exempt 2 years of presence within a 6 year look back period not counting current year
  • Step 2: What days should count toward residency determination?
         Count any days that are not counted as exempt year
  • Step 3: Are the “countable” days greater than 183 days? 
    • Yes – individual is a resident for tax purposes
    • No – individual is a nonresident for tax purposes 

      Look Back
    Period
     
    In the
    U.S.?
     
    U.S.
    Status
     
    Exempt Year?  Countable Days 
    2009 Test Year Yes J-1 Scholar No – Count all days of presence
    beginning 1/1/2009 – 8/25/2009
    237
    2008 Year 6 Yes J-1 Scholar Yes – 2nd Exempt Year N/A
    2007 Year 5 Yes J-1 Scholar Yes – 1st Exempt Year N/A
    2006 Year 4 No      
    2005 Year 3 No      
    2004 Year 2 No      
    2003 Year 1 No      

Summary of Determination

  • This visitor was an "exempt individual" for 2007 and 2008. Although the visitor was in the country for 125 days in 2007, the time is counted as one whole exempt year.
  • Since the 2 years of exemption from the Substantial Presence Test were used, all the days of U.S. presence in 2009 are counted.
  • The days of presence (in 2009 = 237) are greater than 183 days. Our visitor is a resident for tax purposes.

Example 2 - F1 or J1 Student Status

Note for the following example, the F-1 visa status has been used to illustrate the determination of residency for student visa holders. The J-1 student visa status follows the same rules.

A visitor was a citizen and resident of the People's Republic of China immediately prior to her entry into the United States. She is temporarily present in the United States as a graduate student at the university on an F-1 visa (student visa). She arrived in the United States on 09-15-2004 and plans to leave in Feb. 2009. Assuming she has not changed to another immigration status, her tax residency for 2009 would be determined as follows.

  • Step 1: What rule should be applied for an F-1 Student?
         Exempt 5 years from 1st date of entry on an F or J student visa with a life time look back
  • Step 2: What days should count toward residency determination?
         Count any days that are not counted as exempt year
  • Step 3: Are the “countable” days greater than 183 days?
    • Yes – individual is a resident for tax purposes
    • No – individual is a nonresident for tax purposes

    Presence in U.S. Possible
    Exempt Years
     Exempt Year Countable
    Days
    Sept. 9 - Dec. 31, 2004 2004 1st exempt year N/A
    Jan. 1 - Dec. 31, 2005 2005 2nd exempt year N/A
    Jan. 1 - Dec. 31, 2006 2006 3rd exempt year N/A
    Jan. 1 - Dec. 31, 2007 2007 4th exempt year N/A
    Jan. 1 - Dec. 31, 2008 2008 5th exempt year N/A
    Jan. 1 – Feb. 02, 2009 No longer exempt from SPT. Must count days. 6th year is a countable year 33 days

Summary of Determination

  • The student was an "exempt individual" for 2004 - 2008. Although the presence in 2004 was 113 days, the time is counted as one whole exempt year.
  • Since the 5 years of exemption from the Substantial Presence Test (SPT) were used, all the days of U.S. presence in 2009 are counted.
  • The days of presence (in 2009 = 33) are less than 183 day. Our visitor is a nonresident for tax purposes.

Example 3 - Combination Student & Scholar Status in Same Tax Year

A foreign national arrived in the United States for the first time with an F-1 visa on January 3, 2005. After completing his education, he received a J-1 scholar status in May 2009 and was hired at the University as a professor until June 2010. The individual plans on leaving once the appointment has expired (June 2010). The tax residency for 2009 would be determined as follows.

  • Step 1: What rule should be applied for a person who changes status in mid year?
    • Apply the rule for the current visa status 
    • In this example, apply the J-1 visa rule of exemption for 2 years of presence within a 6 year look back
  • Step 2: What days should count toward residency determination?
         Count any days that are not counted as exempt year
  • Step 3: Are the “countable” days greater than 183 days? 
    • Yes – individual is a resident for tax purposes
    • No – individual is a nonresident for tax purposes

      Look Back
    Period
     
    In the
    U.S.?
     
    U.S.
    Status
     
    Exempt Year?  Countable Days 
    2009 Test Year Yes F-1/J-1 No – Count all days of presence
    beginning 1/1/2009 – 12/31/2009
    365
    2008 Year 6 Yes F-1 Student Yes – 4th Exempt Year N/A
    2007 Year 5 Yes F-1 Student Yes – 3rd Exempt Year N/A
    2006 Year 4 Yes F-1 Student  Yes – 2nd Exempt Year  N/A
    2005 Year 3 Yes F-1 Student Yes – 1st Exempt Year N/A
    2004 Year 2 No      
    2003 Year 1 No      

Summary of Determination

  • With the student status, the individual was an "exempt individual" for 2004 - 2008. Even though the individual changed to J-1 during the year, the exempt years must be counted when applying the J-1 exemption rule.
  • Since 2 years of exemption from the Substantial Presence test were used during the 6 year look back (2005 & 2006), all the days of U.S. presence in 2009 are counted.
  • The days of presence (in 2009 = 365) are greater than 183 day. Our visitor is a resident for tax purposes.

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