U.S. tax rules utilize the “Substantial Presence Test” (SPT) as a method to determine tax residency. This test counts the number of days that an individual is physically present in the U.S. over a three-year period.
For 2024, the SPT formula is calculated as the aggregate of:
- All days physically present in 2024
- 1/3 of the days physically present in 2023
- 1/6 of the days physically present in 2022
If an individual is in the U.S. for at least 31 days in 2024 and at least an aggregate of 183 days (as calculated by the above formula), the individual is deemed to be a U.S. resident for tax purposes in 2024.
The Closer Connection Exception:
If the above SPT formula is met and the individual was in the U.S. for less than 183 days in 2024, Form 8840 can be filed with the IRS. This form allows for a closer connection claim to Canada, resulting in an exemption from U.S. residency for tax purposes.
Due Date:
Form 8840 must be submitted to the IRS by June 15 of the year following the tax year in question (June 16, 2025 for the 2024 tax year).
Form Completion:
We can assist in determining if you need to complete Form 8840 for 2024, based on the number of days in 2022, 2023 and 2024 that you were physically present in the U.S.
Please be advised that if you were physically present in the U.S. for 183 days or more in 2024, or you are a U.S. citizen or green card holder, different tax filing requirements will apply.
Please contact your Lipton advisor if you have any questions in connection with this matter.
