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Foreign nationals may not fully understand the effect a green card has on his or her status for United States (“Federal”) tax purposes. The Federal Government taxes United States citizens and resident aliens on their worldwide income, regardless of their presence (or lack of presence) in the US. Nonresident aliens are only subject to Federal tax on their income connected to the United States.

For example, suppose you are a citizen of a foreign country and work full-time in a foreign country. While you may make no income in the United States and you only visit the United States a few weeks each year, the questions arises as to whether you owe Federal tax.

The answer may surprise you. It depends on whether you are deemed a resident alien or a nonresident alien. The test generally depends upon the number of days you are in the US. Most foreign nationals are aware of the “183 day” test, and keep careful track of their days of entry and leaving the US.

However, there is a second test. If you are a current green card holder, then you are deemed to be a resident alien. The number of days you are in the US does not determine your status for US tax purposes. Even if you have no presence in the US, you are still subject to Federal tax if you are a current green card holder.

This broad rule is justified by the US Congress because green card holders “have rights similar to those afforded US citizens (including the right to enter the US at will); equity demands that they contribute to the cost of running the government as much as citizens”.

Two exceptions likely mitigate Federal taxation. One is that a resident alien can claim a tax credit against his or her Federal tax for taxes paid in a foreign country. The other exception is that a tax treaty between the US and a resident alien’s home country may exempt US taxation of a resident’s income earned outside the US.

Federal taxation of foreign nationals is a complex subject. You should seek the legal representation of a tax lawyer and a tax expert. The Libby Law Firm offers representation from tax attorneys and tax experts who not only have worked in the private sector but have also worked with The United States Tax Court. We are ready to serve and assist you with your tax related matters and our Main Office is conveniently located in the heart of Buckhead. Please call us at (404) 467-8611, to discuss your options, or send us a message through our confidential Web Site form.

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