In the realm of US income taxation, the term "US Person" carries significant implications, particularly regarding the taxation of worldwide income and disclosure obligations for certain non-US assets and foreign bank accounts. Understanding whether one is classified as a US Person is crucial, as it determines the extent of their tax liabilities and reporting requirements under US law.
Who is Considered a US Person?
Here are four ways for an individual to become a US Person:
US citizenship: Any individual who holds or is entitled to hold a US passport falls into this category.
Green card holders: Those with a US green card. However, under the "Treaty-tie Breaker Exception," green card holders may not be considered US Persons if they qualify as residents of a country with which the US has an income tax treaty. This determination often requires input from US tax advisors.
Substantial Presence in the US: An individual's physical presence in the US plays a crucial role. The "Substantial Presence Test" considers the total number of days spent in the US over a three-year period, including the current year and the two preceding years. To be classified as a US Person under this test, an individual must be present in the US for at least 31 days in the current year and a combined total of 183 days over the three-year period, with each day in the current year counting as one full day, days in the previous year as one-third of a day, and days from two years ago as one-sixth of a day. For example, you were physically present in the US on 120 days in each of the years 2021, 2022, and 2023. To determine if you meet the substantial presence test for 2023, count the full 120 days of presence in 2023, 40 days in 2022 (1/3 of 120), and 20 days in 2021 (1/6 of 120). Since the total for the 3-year period is 180 days, you are not considered a resident under the substantial presence test for 2023. Exceptions like the "Closer Connection Exception" exist for those who meet certain conditions and do not hold a green card, such as staying in the US for less than 183 days in the current year.
Special election to be treated as a US Person: Rarely, individuals may choose to be treated as a US Person, often seen in cases where someone is married to a US Person.
Practical Examples
A US citizen living and working in Singapore but spending only 30 days annually in the US is still considered a US Person.
A Singapore-based green card holder who rarely visits the US is still a US Person. The Treaty-tie Breaker Exception would not apply because Singapore lacks an income tax treaty with the US.
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