What Is a Non-Resident?
A non-resident is an individual who mainly resides in one region or jurisdiction but has interests in another region. In the region where they do not mainly reside, they will be classified by government authorities as a non-resident.
Key Takeaways
- A non-resident is a person who resides in one jurisdiction but has interests in another. Non-resident status is often important in determining one's eligibility for taxes, government benefits, jury duty, education, voting, and other government functions.
- Non-resident status varies by jurisdiction and the government function in question. Someone may be considered a resident for tax purposes but a non-resident for voting purposes.
- Non-residents may pay higher tuition at state schools. Depending on the state, it may take up to two years to establish residency.
- A non-resident alien is a foreigner who does not have a substantial presence in the U.S., such as seasonal visitors. Non-residents are still required to file taxes if they have income in the U.S.
- State taxes are complicated for non-residents since many people have homes in several states. It is important to understand each state's residency requirements.
Understanding Non-Resident
The classification of non-residency status is determined by set circ*mstances, such as the amount of time spent within a given region during the calendar year. This classification depends on where the person resides and does not focus on citizenship.
For example, many individuals live in one state but have a business or other income sources in another state. In that case, they may have to file two tax returns—a resident return in one state and a non-resident return in the state where they work.
Typically, a non-resident only has to file a state return if they earn income there. A snowbird escapes Chicago during the frigid winter months to a vacation home in Houston may not need to file taxes in Houston, if they were only present for a short time and earned no income.
Special Considerations
However, certain types of income are taxable, even if you do not live or work in that state. A taxpayer may find that they owe taxes to the government through income such as:
- Income received as a shareholder or owner of a flow-through business entity such as a sole proprietorship, partnership, or S corporation.
- Lottery or gambling winnings in the state where the winnings were made.
- Rental income or income received from the sale of a property.
In some cases, a non-resident may have to pay more to go to college in a state where they do not primarily reside. Most states have exemptions for students who attend college out-of-state, classifying these students as residents of their home states.
Generally, a taxpayer can only be a resident of one state. In a situation whereby an individual spends considerable time in two states, they must file a tax return as a resident of one state and a non-resident of the other. Two states cannot tax the same income by law, as each state must exempt from taxation all earnings and other sources of income that were taxed elsewhere.
Resident vs. Non-Resident
The qualifications for residency vary depending on the jurisdiction and the service for which you are exercising residency. Here are some examples:
Voting
In some states, you can register to vote as soon as you establish a residence in that state. Other states have residency requirements of up to 30 days, although the Supreme Court has clamped down on longer requirements.
Higher Education
Most state universities offer lower tuition to in-state students than those from another state. For example, you can study at the world-class University of California for a fraction of the price, as long as you spend a year in California first. Residency requirements vary from state to state: Alaska requires 24 months, but Arkansas only requires six.
Taxes
Many people with multiple homes seek to claim residence in the state with the most advantageous tax rates. This can be complicated since each state has different residency requirements. Most states use the so-called "183-days" rule, whereby you may be considered a resident if you spend more than half a year in that state. Others have more complicated criteria. In a worst-case scenario, it's possible to be taxed as a resident in two states at once, so it's worth spending some time to research the tax residency rules by state.
Examples of Non-Resident
As an example of non-resident determination, imagine a person who lives in New Jersey but works in New York. That person would have to file two state tax returns: one for the state of residence, and one for their income in New York.
For another example, consider someone with a home in New York, and a summer home in Florida. Since Florida does not have an income tax, it makes sense for that person to file their state taxes as a Florida resident. However, New York considers anyone with a "place of abode" in New York to be a potential resident, and will attempt to claim income tax from them. The only way to reliably escape New York residency is to spend less than thirty days in New York.
Non-Resident Aliens
A non-resident alien is a foreigner who does not have a legal residency or a substantial presence in the United States, such as seasonal workers, visiting businesspeople, or those who commute across the border from Canada or Mexico. If you do not have a green card, the Internal Revenue Service determines the residency based on the substantial presence test.
If you do not reside in the United States, you are still required to file a tax return if you have income in the U.S. Non-residents file on form 1040-NR. In most cases, this is taxed at the same rate as resident taxpayers, but for fixed, determinable, annual, or periodical income, the normal rate is 30%.
Substantial Presence Test
"You will be considered a United States resident for tax purposes if you meet the substantial presence test for the calendar year. To meet this test, you must be physically present in the United States (U.S.) on at least:
- 31 days during the current year, and
- 183 days during the 3-year period that includes the current year and the 2 years immediately before that, counting:
All the days you were present in the current year, and
- 1/3 of the days you were present in the first year before the current year, and
- 1/6 of the days you were present in the second year before the current year."
-Internal Revenue Service, "Substantial Presence Test."
Non-Resident FAQs
What Is the Meaning of Resident and Non-Resident?
A non-resident is someone who does not domicile in a given region but has a business or other interests in that region. Residency requirements vary by state and jurisdiction.
How Do I Check My Non-Resident Status?
To check if you are considered a non-resident of a given state, read the tax residency rules by state.
Residency is a bit more complicated for aliens visiting the United States. According to the IRS, you are considered a resident if you have a permanent residence permit (green card) or if you pass the "substantial presence test.'
To determine if you pass the substantial presence test, take the number of days you were physically present in the US over the past year, plus one-third of the number of days you were in the US last year, plus one-sixth of the days the year before that. If the sum of those three numbers is over 183, and you were present for 31 days in the current calendar year, you are considered a resident of the United States for tax purposes.
What Does Non-Resident Mean for Taxes?
For federal taxes, non-residents typically play by the same rules as residents, with access to the same deductions and incentives.
The main exception is Fixed, Determinable, Annual, or Periodical income, such as commissions, dividends, or prizes. This type of income is taxed at a uniform 30% unless there is a tax treaty in place that lowers the figure.
What Is a Non-Resident Corporation?
In Canada, a non-resident corporation is a company that is not legally considered to reside in Canada, but which does business there. Such companies must continue filing taxes if they have Canadian income. The rules for non-resident corporations can be found on the official webpage of the Government of Canada.
The Bottom Line
It's essential to understand how residency rules affect your rights and obligations in any given jurisdiction. While residency rules can be leveraged for lower tuition and other government services, they can also have significant tax implications, especially for non-residents. A close reading of state residency laws could help you skip a sizable tax bill.
FAQs
If you are not a U.S. citizen, you are considered a nonresident of the United States for U.S. tax purposes unless you meet one of two tests. You are a resident of the United States for tax purposes if you meet either the green card test or the substantial presence test for the calendar year (January 1 – December 31).
What is an example of a non-resident? ›
a person who is not staying at or living in a place, for example a hotel: The hotel wellness centre is open to non-residents. not living permanently in a country, and in a special position in relation to the payment of tax: You must be non-resident for five tax years to escape UK capital gains tax.
What is an example of residence status? ›
Considering the example, Mr. D was travelling out of India since past 2 years only. Hence, the first condition is satisfied as he resided in India for atleast 2 years out of the last 10 years. Also, he has fulfilled the criteria of residing for at least 730 days in the last seven years.
Who is resident but not resident? ›
What is a Resident but Not Ordinary Resident in India? There are two conditions for RNOR, first one is If a person is in India for less than the previous seven years, or live in India for 729 days then at that time the person is considered as RNOR.
What is the difference between resident and non-resident alien? ›
Resident aliens generally are taxed on their worldwide income, similar to U.S. citizens. A non-resident alien is a lawful permanent resident of the U.S. at any time if they have been given the privilege, according to the immigration laws, of residing permanently as an immigrant.
Is a U.S. citizen a non resident? ›
As a general matter, under the U.S. Internal Revenue Code (Code), all U.S. citizens and U.S. residents are treated as U.S. tax residents. In order for a non-U.S. citizen (alien individual) to be treated as a resident alien, he or she must satisfy either the “green card test” or the substantial presence test.
Who is a US non resident? ›
An alien is any individual who is not a U.S. citizen or U.S. national. A nonresident alien is an alien who has not passed the green card test or the substantial presence test.
How do I know if I am resident or nonresident? ›
If you are not a U.S. citizen, you are considered a nonresident of the United States for U.S. tax purposes unless you meet one of two tests. You are a resident of the United States for tax purposes if you meet either the green card test or the substantial presence test for the calendar year (January 1 – December 31).
What defines your place of residence? ›
Where you spend the most time. Your legal address listed for tax returns, with the USPS, on your driver's license and on your voter registration card. The home that is near where you work or bank, recreational clubs where you're a member or other family members' homes.
What is considered a US resident? ›
If you are not a U.S. citizen, you are considered a U.S. resident, if you meet one of two tests for the calendar year (January 1 – December 31). You are admitted to the United States as, or change your status to, a lawful permanent resident under the immigration laws (the Green Card Test), or.
You are a resident of wherever you live — your house, town, planet. (Let's assume we're all residents of Earth.) It's where you were born or where you've lived for awhile. Doctors who have their medical licenses but need more training become residents of hospitals.
When a resident becomes a non resident? ›
Resident status when you leave for employment outside India
Thus, if you are an Indian citizen or a person of Indian Origin, and you live outside India for 182 days or above, you will be an NRI.
What is the meaning of non resident? ›
: not residing in a particular place. nonresident noun.
Is a green card holder a non resident alien? ›
For the green card test, you're considered a resident alien if you are legally living permanently in the United States as an immigrant. You have this status if you have an alien registration card, (known by you and I as a green card).
What is the difference between permanent resident and non citizen? ›
Permanent Resident: Eligibility for a Passport. The most significant difference between citizenship and permanent residence is the ability to apply for a passport for the country in which you reside. Permanent residents do not have the right to apply for a passport.
How is a resident different from an immigrant? ›
Other immigrants are undocumented. That means they do not have a green card or other valid legal visa. A lawful permanent resident (someone with a “green card”) is an immigrant with legal permission to live in the U.S. for as long as s/he wants to. Permanent residents get special cards that they must carry.
Am I resident alien if I am a U.S. citizen? ›
A resident alien for tax purposes is a person who is a U.S. citizen or a foreign national who meets either the “green card” or “substantial presence” test as described in IRS Publication 519, U.S. Tax Guide for Aliens.
Is a U.S. citizen a permanent resident? ›
One of the largest differences between a citizen and permanent resident is that citizens are eligible to receive a U.S. passport issued by the U.S. State Department. Citizens can leave and reenter the United States without any restrictions, whereas a permanent resident may need a reentry permit.
Will I be U.S. citizen or resident if I have green card? ›
A U.S. green card allows a person to live and work in the United States and start the process to become a naturalized U.S. citizen. This card makes the holder a permanent resident of the United States, entitled to many of the same benefits as a citizen, but not all.
Can a non citizen be a resident? ›
Lawful permanent residents (LPRs), also known as “green card” holders, are non-citizens who are lawfully authorized to live permanently within the United States.
Travel Without a Visa
Visits must be 90 days or less, and travelers must meet all requirements.
What is a US national vs resident? ›
All US citizens are US nationals, though the inverse isn't always true (we'll discuss the difference shortly). In contrast, a Green Card holder is an immigrant who has permission to live and work in the United States. By definition, a Green Card holder would be a foreign national or foreign citizen, not a US national.
Can a U.S. citizen be a non resident for tax purposes? ›
The United States is one of two countries in the world, where a tax on foreign income is based on citizenship and not residence. Therefore, when you are considered a U.S. person for tax purposes – which is 100% correct if you have American citizenship – you are required to report and file a tax return to the IRS.
Is h1b resident or non resident? ›
Generally, an alien in H-1B status (hereafter referred to as “H-1B alien”) will be treated as a U.S. resident for federal income tax purposes if he or she meets the Substantial Presence Test. The test is applied on a calendar year-by-calendar year basis (January 1 – December 31).
What is the legal definition of a resident? ›
You must have or had physical presence in the state and simultaneously the intent to remain or make the state your home or domicile. You may only have one legal residence at a time, but may change residency each time you are transferred to a new location.
What are the two types of residence? ›
Types of Residences: Single/multi-family homes - San Marcos Realty.
What is an example of a legal residence? ›
For example, a person's legal residence can be their permanent home, the place where they were born, or the place where they have established a marital home with their spouse. A corporation's legal residence is usually its state of incorporation or the state in which it maintains its principal place of business.
How does the IRS determine primary residence? ›
If you own and live in just one home, then that property is your main home. If you own or live in more than one home, then you must apply a "facts and circ*mstances" test to determine which property is your main home. While the most important factor is where you spend the most time, other factors are relevant as well.
What is the non resident 5 year rule? ›
Even though you may be deemed non-resident for income tax purposes, you are treated as temporarily non-resident for capital gains tax purposes for up to 5 years. Certain gains made during that time are taxed in the year you return to the UK if within five years.
Why do they call it a resident? ›
Residents are, collectively, the house staff of a hospital. This term comes from the fact that resident physicians traditionally spend the majority of their training "in house" (i.e., the hospital). Duration of residencies can range from three years to seven years, depending upon the program and specialty.
People training to be a medical doctor are given different titles as they progress through the ranks. They begin as medical students, then progress to interns, residents, and fellows. Once residency and fellowship trainings are complete, a person can become a board-certified attending physician.
What defines a resident in healthcare? ›
Residents are doctors in training. They have graduated from medical school, been awarded an M.D. degree, and now are training to be a particular type of doctor — such as a pediatrician or pediatric specialist, or a type of surgeon. In their first year of such training, residents are sometimes called interns.
What is the definition of non resident under FEMA? ›
NRI as per FEMA
NRI is defined under FEMA as a person resident outside India who is either a citizen of India or is a Person of Indian Origin (PIO).
What is a temporary non resident? ›
You will be regarded as temporarily non-resident if:
your period of non-residence is five years or less. 'Years' in this context mean 'periods of 12 months', not tax years. It will now cover a wider range of taxes.
What does residency mean for immigrants? ›
A resident alien is also known as a permanent resident or a lawful permanent resident, which means they are considered an immigrant who has been legally and lawfully recorded as a resident of the country. A resident alien must have a green card or pass a substantial presence test.
What is another word for non resident? ›
On this page you'll find 49 synonyms, antonyms, and words related to nonresident, such as: alien, different, external, offshore, overseas, and unfamiliar.
What is difference between residence and resident? ›
Examples of such uses are "a creative writing resident," "medical residents," or "a resident performer." And, obviously, resident is applicable to a person who is living in a "residence." A residence is any place where one actually lives—a home, apartment, etc.
What is a non permanent resident? ›
A non-permanent resident is a non-U.S. citizen living in the United States for a set period. Once that time expires, the individual is normally required to leave the country, unless their immigration status has changed and they're granted the right to remain.
What is the definition of non-resident? ›
Meaning of Non-resident
Section 2(30) defines non-resident as a person who is not a resident. Section 6 lays down the test of residency for different taxpayers.
What does non-resident status mean? ›
A nonresident is a person who is not a resident of California. Generally, nonresidents are: Simply passing through. Here for a brief rest or vacation.
Thus, if you are an Indian citizen or a person of Indian Origin, and you live outside India for 182 days or above, you will be an NRI.
What is the legal definition of non-resident? ›
According to 26 USC § 865(g)(1) “The term 'nonresident' means any person other than a United States resident.” A nonresident is any individual who does not primarily reside in one state or one country, but has an interest in it.
What is a non resident worker? ›
An individual present in the U.S. on a temporary visa, who is not a tax resident of the U.S., is considered to be a “Non-Resident Alien.” Non-resident aliens have special taxation rules and may be able to claim tax treaty benefits for reduced federal taxation.
What is mean by residents? ›
noun. res·i·dent. ˈre-zə-dənt. : one who has a residence in a particular place but does not necessarily have the status of a citizen compare citizen sense 1, domiciliary. resident adjective.
What is considered a U.S. resident? ›
If you are not a U.S. citizen, you are considered a U.S. resident, if you meet one of two tests for the calendar year (January 1 – December 31). You are admitted to the United States as, or change your status to, a lawful permanent resident under the immigration laws (the Green Card Test), or.
Who are non resident under FEMA? ›
NRI as per FEMA
NRI is defined under FEMA as a person resident outside India who is either a citizen of India or is a Person of Indian Origin (PIO). PIO means a citizen of any country other than Bangladesh or Pakistan, who at any time held Indian Passport, or.
What is the lawful definition of resident? ›
A resident is a person who lives in a particular place for the indefinite future. Federal courts may determine whether a person is a resident, also referred to as being domiciled, of a state to determine whether diversity jurisdiction exists. For example, in Baker v.
Can you be non resident everywhere? ›
As long as you're no longer tax resident in any country (including country of birth, citizenship, but also others where you've lived/worked/have a connection) according to those countries' domestic rules, it's totally possible to be a tax resident of nowhere.
