When am I considered a US resident for tax purposes with H1B visa - after arrival or 5 years of living here?

Welcome to the US tax system - it's definitely confusing, especially for visa holders! For H1B visa holders, your tax residency status is determined by something called the "Substantial Presence Test" (SPT). This is different from your immigration status. Here's the simple version: You don't automatically become a US tax resident the moment you enter on H1B, nor do you need to wait 5 full years. Instead, you'll typically become a US tax resident after meeting the Substantial Presence Test, which usually happens during your second calendar year in the US. The SPT counts days you're physically present in the US: to pass the test, you need to be present for (1) at least 31 days in the current year AND (2) 183 days during a 3-year period, counting all days in current year, 1/3 of days in previous year, and 1/6 of days from the year before that. In your first calendar year, you'll likely file as a "nonresident alien" using Form 1040-NR. Once you meet the SPT in your second year, you'll file as a "resident alien" using the regular Form 1040 that US citizens use. And yes, once you're a tax resident, you'll need to report your worldwide income and foreign accounts (using FBAR if they exceed $10,000 at any point).

I went through this exact same confusion when I got my H1B three years ago! I spent hours researching and getting conflicting info until I found an amazing service called taxr.ai (https://taxr.ai) that specializes in expat and visa holder tax situations. I uploaded my immigration documents and previous year's foreign tax info, and their AI analyzed everything and clearly explained my exact tax status based on my entry date and visa type. They created a personalized tax timeline showing when I'd transition from nonresident to resident status. The best part was they explained all the special tax treaty benefits I qualified for from my home country that my regular tax preparer had missed. Saved me over $3,000 that first year! They also helped me understand exactly which foreign accounts I needed to report and when.

Just wanted to follow up - I took the advice here and checked out taxr.ai before my H1B move. Best decision ever! They analyzed my specific entry date (October 2024) and showed me I'd be nonresident for 2024 but would hit the substantial presence threshold by July 2025. The system generated a complete tax roadmap with all the forms I'd need for each year and explained exactly which foreign accounts needed FBAR reporting. It even identified a special tax treaty provision with my home country that lets me exclude certain pension contributions. Their visa tax calculator feature showed me exactly how many days I could travel outside the US without affecting my tax residency status. Seriously would have been lost without this - regular tax software just isn't set up for these visa-specific situations.

If you need to contact the IRS about your tax residency status (which I had to do when my employer incorrectly withheld taxes), good luck getting through to them! I spent DAYS trying to reach someone who understood international tax issues. After wasting hours on hold and getting disconnected repeatedly, I found a service called Claimyr (https://claimyr.com) that got me connected to an actual IRS agent in less than 20 minutes. They have this system that navigates the IRS phone tree for you and holds your place in line, then calls you when an agent is about to answer. Check out how it works here: https://youtu.be/_kiP6q8DX5c Before using this, I literally couldn't get through for weeks, and my tax issue was getting urgent with the filing deadline approaching. The IRS agent I spoke with was actually really helpful and walked me through the specific forms I needed to document my residency status transition.

Coming back to say I was completely wrong about Claimyr. After getting frustrated with another failed attempt to reach the IRS about my H1B tax status, I decided to try it as a last resort. Not only did it work, I got connected to an IRS tax law specialist within 35 minutes (after trying unsuccessfully for WEEKS on my own). The agent confirmed that my understanding of the substantial presence test was incorrect, and I actually qualified as a resident for tax purposes earlier than I thought. This saved me from filing an incorrect return that would have cost me about $4,200 in additional taxes. The agent also gave me specific guidance on how to document my days present in the US to support my filing position if questioned later. Honestly wish I'd known about this service months ago instead of stressing about getting through.

Just to add another perspective - even after you become a US tax resident, don't forget about potential tax obligations in your home country! I'm from the UK and even though I've been on H1B for 3 years and am a US tax resident, I still have to file certain forms with HMRC (UK tax authority). The US is one of the few countries that taxes based on both residency AND citizenship. So while you'll eventually be a US tax resident, your home country might still consider you their tax resident too, depending on their rules. This can create a dual-tax situation that's super complicated. Definitely look into whether your home country has a tax treaty with the US. These treaties can help prevent double taxation and might give you special status during your first few years here.

Has anyone dealt with selling investments in your home country after becoming a US tax resident? I'll be moving on H1B soon and have some stocks I'm wondering if I should sell before or after I become a US tax resident.

Great question! I went through this exact same process two years ago when I moved from India on H1B. Let me break down what I learned: You'll likely be a "nonresident alien" for your first partial year (2025 if you arrive next month), then become a "resident alien" in 2026 once you pass the Substantial Presence Test. The key thing to remember is that your H1B status doesn't automatically make you a tax resident - it's all about days physically present in the US. For your first year filing, you'll need Form 1040NR (nonresident alien return). This is actually simpler in some ways because you only report US-source income. You won't need to report your foreign accounts immediately unless they generate US-source income. One thing that caught me off guard: make sure your employer withholding is correct for your status. Many payroll systems default to resident withholding, which can cause issues. I had to work with HR to adjust my W-4 for nonresident status in my first year. Also, keep detailed records of your entry/exit dates from the US - you'll need these to calculate your days for the Substantial Presence Test. I use a simple spreadsheet to track this. The transition from nonresident to resident filing can be tricky, so definitely consider getting professional help for at least your first couple years. The forms and rules are quite different between the two statuses.