What Is the 183-Day Rule?

By WILL KENTON
Reviewed By LEA D. URADU 
Updated Jul 1, 2020
What Is the 183-Day Rule?
The 183-day rule is used by most countries to determine if someone should
be considered a resident for tax purposes. In the U.S., the Internal Revenue
Service uses 183 days as a threshold in the "substantial presence test," which
determines whether people who are neither U.S. citizens nor permanent
residents should still be considered residents for taxation.

KEY TAKEAWAYS

 The 183-day rule refers to criteria used by many countries to determine

if they should tax someone as a resident.
 The 183rd day marks a majority of the year.
 The U.S. Internal Revenue Service uses a more complicated formula,
including a portion of days from the previous two years as well as the
current year.
Understanding the 183-Day Rule
The 183rd day of the year marks a majority of the days in a year, and for this
reason countries around the world use the 183-day threshold to broadly
determine whether to tax someone as a resident. These include Canada,
Australia, and the United Kingdom, for example. Generally, this means that if
you spent 183 days or more in the country during a given year you are
considered a tax resident for that year.

The IRS and the 183-Day Rule

However, the IRS uses a more complicated formula to reach 183 days and
determine whether someone passes the substantial presence test. To pass
the test, and thus be subject to U.S. taxes, the person in question must:

 Have been physically present at least 31 days during the current year
and;
 Present 183 days during the three-year period that includes the current
year and the two years immediately preceding it. Those days are
counted as:
 All of the days they were present during the current year
 One-third of the days they were present during the previous year
 One-sixth of the days present two years previously

Other IRS Terms and Conditions

The IRS generally considers someone to have been present in the U.S. on a
given day if they spent any part of a day there. But there are some exceptions.

Days that do not count as days of presence include:

 Days that you commute to work in the U.S. from a residence in Canada
or Mexico, if you do so regularly
 Days you are in the U.S. for less than 24 hours while in transit between
two other countries
 Days you are in the U.S. as a crew member of a foreign vessel
 Days you are unable to leave the U.S. because of a medical condition
that develops while you are there

U.S. Citizens and Resident Aliens

Strictly speaking, the 183-day rule does not apply to U.S. citizens and
permanent residents. U.S. citizens are required to file tax returns regardless of
their country of residence or the source of their income. However, they may
exclude at least part of their overseas earned income (up to $105,900 in 2019)
from taxation provided they meet a physical presence test in the foreign
country and paid taxes there. To meet the physical presence test, the person
needs to be present in the country for 330 days in 12 months.

U.S. Tax Treaties and Double Taxation

The U.S. has tax treaties with other countries to determine jurisdiction for
income tax purposes and to avoid double taxation of their citizens. These
agreements contain provisions for the resolution of conflicting claims of
residence.

Reference:
https://www.investopedia.com/terms/1/183-day-rule.asp