The Substantial Presence Test is a calculation that determines the resident or nonresident status of a foreign national for tax purposes in the United States. The Substantial Presence Test must be applied on a yearly basis. However, during the first five calendar years the student on an F-1 or J-1 immigration status is present in the U.S., he or she is considered an "Exempt Individual." This status means merely that the individual does not count days of actual presence in the U.S. for purposes of satisfying the Substantial Presence Test. Therefore, assuming the individual had no previous visits to the U.S., the individual will be a nonresident alien for U.S. tax purposes during the first five calendar years of presence in the U.S.
For a teacher or a scholar on a J-1 immigration status, the determination of his or her "Exempt Individual" years are based on any two years within the current and past six calendar years. The term "calendar year" refers to the period from January 1 - December 31, not twelve consecutive months. Therefore, if the individual is present in the U.S. as an "Exempt Individual" for any part of one calendar year, that year is calculated as a whole year. Consequently, an individual present in the U.S. under a J-1 non-student immigration status may fall in and out of nonresident alien status for U.S. tax purposes depending on the results of the Substantial Presence Test as it is applied on a yearly basis.
The following calculation determines the number of days to satisfy the substantial presence test:
- The individual must be present in the U.S. for at least 31 days during the current calendar year.
- The individual must use the following calculation to satisfy the substantial presence test:
- ALL of the days physically present in the U.S. in the current calendar year
- PLUS 1/3 the number of days physically present in the U.S. during the first preceding year
- PLUS 1/6 the number of days physically present in the U.S. during the second preceding year
- EQUALS 183 days or greater, the individual is considered resident alien for tax purposes