What Is the 183-Day Rule?
The 183-day rule is used by most countries to determine if someone should be considered a resident for tax purposes. In the U.S., the Internal Revenue Service (IRS) uses 183 days as a threshold in the "substantial presence test," which determines whether people who are neither U.S. citizens nor permanent residents should still be considered residents for taxation.
- The 183-day rule refers to criteria used by many countries to determine if they should tax someone as a resident.
- The 183rd day marks the majority of the year.
- The U.S. Internal Revenue Service uses a more complicated formula, including a portion of days from the previous two years as well as the current year.
- The U.S. has treaties with other countries concerning what taxes are required and to whom, as well as what exemptions apply, if any.
- U.S. citizens and residents may exclude up to $108,700 of their foreign-earned income in 2021 if they meet the physical presence test and paid taxes in the foreign country.
Understanding the 183-Day Rule
The 183rd day of the year marks a majority of the days in a year, and for this reason countries around the world use the 183-day threshold to broadly determine whether to tax someone as a resident. These include Canada, Australia, and the United Kingdom, for example. Generally, this means that if you spent 183 days or more in the country during a given year, you are considered a tax resident for that year.
Each nation subject to the 183-day rule has its own criteria for considering someone a tax resident. For example, some use the calendar year for its accounting period, whereas some use a fiscal year. Some include the day the person arrives in their country in their count, while some do not.
Some countries have even lower thresholds for residency. For example, Switzerland considers you a tax resident if you have spent more than 90 days there.
The IRS and the 183-Day Rule
The IRS uses a more complicated formula to reach 183 days and determine whether someone passes the substantial presence test. To pass the test, and thus be subject to U.S. taxes, the person in question must:
- Have been physically present at least 31 days during the current year and;
- Present 183 days during the three-year period that includes the current year and the two years immediately preceding it.
Those days are counted as:
- All of the days they were present during the current year
- One-third of the days they were present during the previous year
- One-sixth of the days present two years previously
Other IRS Terms and Conditions
The IRS generally considers someone to have been present in the U.S. on a given day if they spent any part of a day there. But there are some exceptions.
Days that do not count as days of presence include:
- Days that you commute to work in the U.S. from a residence in Canada or Mexico if you do so regularly
- Days you are in the U.S. for less than 24 hours while in transit between two other countries
- Days you are in the U.S. as a crew member of a foreign vessel
- Days you are unable to leave the U.S. because of a medical condition that develops while you are there
- Days in which you qualify as exempt, which includes foreign-government-related persons under an A or G visa, teachers and trainees under a J or Q visa; a student under an F, J, M, or Q visa; and a professional athlete competing for charity
U.S. Citizens and Resident Aliens
Strictly speaking, the 183-day rule does not apply to U.S. citizens and permanent residents. U.S. citizens are required to file tax returns regardless of their country of residence or the source of their income.
However, they may exclude at least part of their overseas earned income (up to $108,700 in 2021) from taxation provided they meet a physical presence test in the foreign country and paid taxes there. To meet the physical presence test, the person needs to be present in the country for 330 complete days in 12 consecutive months.
Individuals residing in another country and in violation of U.S. law will not be allowed to have their incomes qualify as foreign-earned.
U.S. Tax Treaties and Double Taxation
The U.S. has tax treaties with other countries to determine jurisdiction for income tax purposes and to avoid double taxation of their citizens. These agreements contain provisions for the resolution of conflicting claims of residence.
Residents of these partner nations are taxed at a lower rate and may be exempt from U.S. taxes for certain types of income earned in the U.S. Residents and citizens of the U.S. are also taxed at a reduced rate and may be exempt from foreign taxes for certain income earned in other countries. It is important to note that some states do not honor these tax treaties.
183 Day Rule FAQs
How Many Days Can You Be in the U.S. Without Paying Taxes?
The IRS considers you a U.S. resident if you were physically present in the U.S. on at least 31 days of the current year and 183 days during a three-year period. The three-year period consists of the current year and the prior two years. The 183-day rule includes all the days present in the current year, 1/3 of the days you were present in year 2, and 1/6 of the days you were present in year 1.
How Long Do You Have To Live in a State Before You’re Considered a Resident?
Many states use the 183-day rule to determine residency for tax purposes, and what constitutes a day varies among states. For instance, any time spent in New York, except for travel to destinations outside of New York (e.g., airport travel), is considered a day. So, if you work in Manhattan but live in New Jersey, you may still be considered a New York resident for tax purposes even if you never spend one night there.
It is important to consult the laws of each state that you frequent to determine if you are required to pay their income taxes. Also, some states have special agreements whereby a resident who works in another state is only required to pay taxes in the state of their permanent residence—where they are domiciled.
How Do I Calculate the 183-Day Rule?
For most countries that apply this rule, you are a tax resident of that country if you spend 183 or more there. The United States, however, has additional criteria for applying the 183-rule. If you were physically present in the U.S. on at least 31 days of the current year and 183 days during a three-year period, you are a U.S. resident for tax purposes. Additional stipulations apply to the three-year threshold.
How Do I Know if I Am a Resident for Tax Purposes?
If you meet the IRS criteria for being qualified as a resident for tax purposes and none of the qualified exceptions apply, you are a U.S. resident. You are a tax resident if you were physically present in the U.S. for 31 days of the current year and 183 days in the last three years, including the days present in the current year, 1/3 of the days from the previous year, and 1/6 of the days from the first year.
The IRS also has rules regarding what constitutes a day. For example, commuting to work from a neighboring country (e.g., Mexico and Canada) does not count as a day. Also, exempt from this test are certain foreign government-related individuals, teachers, students, and professional athletes temporarily in the United States.
Do I Meet the Substantial Presence Test?
It is important to consult the laws of the country for which the test will be performed. If wanting to find out about meeting the U.S.'s substantial presence test, you must consider the number of days present within the last three years.
First, you must have been physically present in the United States for 31 days of the current year. If so, count the full number of days present for the current year. Then, multiply the number of days present in year 1 by 1/6 and the days in year 2 by 1/3. Sum the totals. If the result is 183 or more, you are a resident. Lastly, if none of the IRS qualifying exceptions apply, you are a resident.