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Filing Statuses and Tax Residency of Foreign Individuals in the United States – Part 2

March 30, 2026 by
Patrik Hancz, JD

In the previous part, we reviewed the detailed rules of three filing statuses: Married Filing Jointly (joint return), Married Filing Separately (separate returns), and Qualifying Surviving Spouse (surviving spouse). We examined the conditions under which taxpayers may use these statuses. We also briefly mentioned that in certain cases – for example, in the case of living separately – the Head of Household status may also be available, which will partly be the topic of the next part.

In today’s article, we will further deepen our understanding and review the rules for determining tax residency, which define who qualifies as a taxable person in the United States.

The Head of Household (HOH) is a more favorable filing category that provides a higher standard deduction and more advantageous tax rates than the Married Filing Separately return. Its purpose is to provide financial relief to those taxpayers who, as single or separated individuals, contribute significantly to the support of a dependent person.

Main conditions:

  • Marital status: On the last day of the tax year, the taxpayer must not have a spouse, or they must have lived separately for the entire year and not have filed a Married Filing Joint Return.
  • Maintaining the household: The taxpayer must have provided at least 50% of the household expenses for more than half of the year.
  • Presence of a dependent person: A qualifying person (typically a child or other close relative) must also live in the household, who entitles the taxpayer to the HOH status. We will discuss this in more detail in Part 3.

Although the HOH is generally available to single individuals, a married taxpayer may also qualify if they lived apart from their spouse throughout the year and maintained a household for their child, covering most of the household’s expenses. This option may be relevant in situations where the couple is still legally married but already living separately – for them, the HOH may be a more favorable alternative than Married Filing Separately.

Indeed, spouses who wish to file their returns separately must file a tax return even with $5 of gross income. In a later article, we will also discuss what gross income means exactly.

U.S. Tax Residency

The U.S. tax system places special emphasis on whether a taxpayer qualifies as a resident or nonresident, as this fundamentally determines the extent of their tax obligations. The question of tax residency is defined by the Internal Revenue Service (IRS) based on various tests and rules. Below, we will look at the main categories of U.S. tax residency, including the terms resident alien, nonresident alien, and dual-status alien.

Resident Alien and Nonresident Alien Status

The IRS determines whether a foreign individual qualifies as a resident or nonresident under U.S. tax law based on two main methods:

Green Card Test

If a person holds a valid permanent resident permit (Green Card) at any time during the year, they are considered a resident alien for that year, regardless of how many days they were physically present in the United States.

Substantial Presence Test

Individuals who do not hold a Green Card may also be considered residents if their physical presence in the United States exceeds the period calculated as follows:

  • At least 31 days during the current year, and
  • The weighted total number of days spent in the current year, the previous year, and the year before that exceeds 183 days, calculated as follows:
Example: Patrik spent 120 days in the United States in each of the years 2024, 2023, and 2022. To determine whether he meets the Substantial Presence Test for 2024, we must count all 120 days of 2024, 40 days from 2023 (one-third of 120), and 20 days from 2022 (one-sixth of 120). Since the total presence over the three years is 180 days, Francesco does not qualify as a resident under the test for 2024.

If a person does not qualify as a resident under either test, they must be taxed as a nonresident alien, which may result in significant differences in tax obligations and allowable deductions.

Dual-Status Alien

In certain cases, a person may be considered a resident alien for part of the tax year and a nonresident alien for the other part. This may occur if:

  • The person receives a Green Card or first meets the conditions of the Substantial Presence Test during the tax year, or
  • The person loses their resident status during the tax year.
Why is this important? Dual-status taxpayers are subject to tax on both U.S. and foreign-source income during the period in which they are residents, while during the nonresident period, only U.S.-source income is taxable.

In the next part, we will examine how the IRS defines dependents and the conditions under which a person qualifies as a Qualifying Child or Qualifying Relative in the U.S. tax system.

The information provided in this article is for informational purposes only and does not constitute tax or legal advice.

Sources


Hungarian Tax Penalties – Part I: Tax Deficiency, Tax Penalty and Default Penalty