Loading the player...

What is a 'Resident Alien'

A resident alien is a foreign person who is a permanent resident of the country in which he or she resides, but does not have citizenship. To fall under this classification in the United States, a person needs to either have a current green card or have had one in the previous calendar year. People can also fall under the U.S. classification of resident alien if they have been in the United States for more than 31 days during the current year, along with having been in the United States for at least 183 days over a three-year period, including the current year.

BREAKING DOWN 'Resident Alien'

These two qualification processes for a resident alien are referred to as the green card test and the substantial presence test. However, it's possible to be considered exempt from resident alien status, in which case a person does not need to prove compliance with the green card test or the substantial presence test. Situations in which a person is present in the United States on government-related issues or when a student or teacher is temporarily present in the United States are both examples of exemptions.

The main issue with resident aliens is that of tax law. Resident and non-resident aliens have different filing advantages and disadvantages. For example, a resident alien can use foreign tax credits, whereas a non-resident cannot. However, in general, a resident alien is subject to the same taxes as a U.S. citizen, while a non-resident alien only pays tax on domestic income that is generated within the Unites States, not including capital gains. Therefore, resident aliens are required to report worldwide income from sources both within and outside the United States. Income is reported using form 1040EZ, form 1040A or form 1040. Non-resident aliens, on the other hand, report domestic income using form 1040NR or form 1040NR-EZ.

An Example of a Resident Alien

Often times, resident alien status provides positive benefits for the United States and for those seeking the status. For example, Cristela Alonzo, an actress, comedian and a contributor to Time Magazine, had a mother and brother who were both granted resident alien status. Her mother, a single parent, immigrated from Mexico with her eldest son and tried for years to obtain resident alien status.

After numerous attempts, both Alonzo's mother and her older brother received the desired status. Then, Alonzo's mother had three natural born citizens, bringing the total number of her children to four. As of today, each of the four kids hold respectable jobs and are contributing members of society, helping the U.S. economy. This family would not have been able to add value to the American economy and realize a better life had Alonzo's mother not been granted resident alien status.

RELATED TERMS
  1. IRS Publication 519 - U.S. Tax ...

    A document published by the Internal Revenue Service (IRS) that ...
  2. Alien Corporation

    An alien corporation is a corporation that was created in another ...
  3. IRS Publication 54

    A document published by the Internal Revenue Service that outlines ...
  4. Form 1078

    An official document issued by the Internal Revenue Service (IRS) ...
  5. Non-Resident

    An individual who mainly resides in one region or jurisdiction ...
  6. Nursing Home Resident Trust Fund

    A nursing home resident trust fund helps residents manage finances ...
Related Articles
  1. Retirement

    5 Developed Countries That Welcome Expats

    Investigate these expat havens if you seek a developed country with low barriers for getting a permanent resident visa – sometimes even citizenship.
  2. Investing

    5 Hardest Countries to Gain Citizenship

    The United States is one of five countries that put up very high barriers for foreigners to get citizenship. Here's how it compares to the other four.
  3. Retirement

    5 Ways to Protect Pensions from Nursing Homes

    How to safeguard a patient's funds from shady or unscrupulous staffers.
  4. Personal Finance

    Not a U.S. Citizen? A Home Loan is Still Possible

    Many banks and mortgage companies offer conventional and FHA home loans to non-U.S. citizens, if they can verify their work history and financial status.
  5. Retirement

    Foreign Citizen Alert: How Are Your 401(k) Withdrawals Taxed?

    As a U.S. nonresident, deciding what to do with your 401(k) after you return home comes down to which tax penalties, if any, you're willing to incur.
  6. Retirement

    5 Easiest Countries to get Citizenship to Retire

    Discover five of the countries that make it easiest for you to obtain citizenship and a second passport through residency, investment or other means.
  7. Personal Finance

    A Monthly Budget Blueprint for Medical Residents

    Medical students should start budgeting before classes or their residency begins. Here are some tips, including a spreadsheet.
  8. Retirement

    Things Nursing Homes Are Not Allowed to Do

    Nursing home residents just got new safeguards to their rights – rights they aren't suppose to lose when entering a facility.
  9. Retirement

    How Much Do You Need to Retire in the Bahamas?

    The Bahamas may be paradise, but it’s also a financial enigma: low taxes and affordable real estate, but “island prices” on practically everything else.
  10. Personal Finance

    The Personal Finance Issues Medical Residents Face

    Medical residents need to take care of their finances just as much as they care for patients.
RELATED FAQS
  1. Do non-U.S. citizens living outside the U.S. pay taxes on money earned through a ...

    The tax implications for a foreign investor will depend on whether that person is classified as a resident alien or a non-resident ... Read Answer >>
  2. What is an alienation clause?

    Whether used in reference to insurance policies, mortgages or commercial loans, an alienation clause stipulates that should ... Read Answer >>
Hot Definitions
  1. Receivables Turnover Ratio

    Receivables turnover ratio is an accounting measure used to quantify a firm's effectiveness in extending credit and in collecting ...
  2. Treasury Yield

    Treasury yield is the return on investment, expressed as a percentage, on the U.S. government's debt obligations.
  3. Return on Assets - ROA

    Return on assets (ROA) is an indicator of how profitable a company is relative to its total assets.
  4. Fibonacci Retracement

    A term used in technical analysis that refers to areas of support (price stops going lower) or resistance (price stops going ...
  5. Ethereum

    Ethereum is a decentralized software platform that enables SmartContracts and Distributed Applications (ĐApps) to be built ...
  6. Cryptocurrency

    A digital or virtual currency that uses cryptography for security. A cryptocurrency is difficult to counterfeit because of ...
Trading Center