Dual-Status Aliens
A dual-status alien is a person who is considered a resident alien and a nonresident alien during the same tax year.
You are most likely to have dual status in the year of your arrival in or departure from the United States. You could, for example, be a resident alien until your departure from the United States. Thereafter, you would be a nonresident alien.
For purposes of computing your tax liability, different rules apply to the time when you are a resident alien and the time when you are a nonresident alien. However, it is necessary to fill out only one tax return. You are taxed on your worldwide income for the part of the year in which you are a resident alien. For the part of the year in which you are a nonresident alien, only certain types of your U.S. source income are taxed. Dual-status aliens who are married may not file a joint return or claim the standard deduction.
Exceptions. You may make a special election that may decrease your taxes for some years in which you have dual status. Dual-status aliens who are married have two other alternatives in the year in which they arrive in the United States:
- The Section 6013(h) election. This election is available only in cases in which a U.S. citizen or resident alien is married to an individual who is a resident alien at the close of the tax year. An alien choosing this alternative is treated as a resident of the United States for the entire tax year. The most significant consequences of making this choice are:
- All income, whether from a U.S. or a foreign source, is subject to tax, including any income you had during the period in which you were not a resident of the United States. This income would have been exempt from U.S. taxes, or possibly taxed at a reduced rate, if you had not made the Section 6013(h) election.
- You may claim itemized deductions for the period in which you were not a resident of the United States, if such items would otherwise qualify for deduction. Some examples are foreign real property taxes, mortgage interest, and medical expenses.
- You may deduct, or elect to claim as a credit, foreign income taxes attributable to the period during which you were not a U.S. resident, which may substantially reduce or even eliminate U.S. income tax. Other benefits, however, like being able to file a joint return and thus be taxed at accordingly lower rates, are left intact. The result is that your net U.S. tax liability may be reduced.
The Section 6013(g) election. Under the Section 6013(g) election, a married couple may file a joint return as full-year residents of the United States if, at the end of the tax year, one spouse is a nonresident alien and the other is a citizen or resident alien of the United States.
The effects of making this election are the same as choosing the Section 6013(h) election, with one very significant distinction. The Section 6013(g) election is valid for all subsequent years in which you and your spouse qualify, including the year in which the resident alien leaves the United States. Once made, the Section 6013(g) election can be revoked. However, if you revoke the election, you cannot make another such election in the future. On the other hand, the Section 6013(h) election relates to only the year of the election and not later years. The election cannot be made if either spouse made the election in a prior year.
Example. You and your spouse became U.S. residents on April 1, 2017. Prior to your arrival in the United States, you earned $5,000 in wages and your spouse earned $1,000 in wages. Both of you also had $500 in joint interest income for the first 3 months of the year. Once in the United States, you earned $75,000 from April through December. Your spouse did not work in the United States. You had an additional $700 in joint interest income. Your itemized deductions equal the standard deduction. Your tax liabilities are computed as follows:
Alternative 1: Dual-status return, married filing separately (for period while a U.S. resident)
Salary |
$75,000 |
Interest |
350 |
Itemized deductions |
(6,350) |
Exemptions |
(4,050) |
Taxable income |
$64,950 |
Tax |
$11,976 |
You would not be taxed on your non-U.S. source income.
Alternative 2: Full-year election, joint return
Salary |
$81,000 |
Interest |
1,200 |
Standard deduction |
(12,700) |
Exemptions |
(8,100) |
Taxable income |
$61,400 |
Tax |
$8,278 |
By electing to be treated as a resident alien for the entire tax year, you save $3,698 in federal income taxes. Note that your spouse could not be claimed as a dependent under Alternative 1, since your spouse had income during the U.S. residency period. Your spouse does not need to file a return under Alternative 1, since your spouse’s income did not exceed the amount that requires you to file. (See chapter 1, Filing information.)
The $6,500 in income that you and your spouse had in your home country would probably be subject to tax there. If so, you would be eligible for the foreign tax credit if you filed under Alternative 2. The tax credit would further lower your taxes. See chapter 38, Other credits including the earned income credit, for a discussion of the foreign tax credit.