What Is the 183-Day Rule?
The 183-day rule refers to a threshold used by most countries to determine whether an individual should be considered a resident for tax purposes. This number is often used in a tax context because it marks the point at which someone has spent more than half the calendar year in a particular jurisdiction.
In the U.S., the Internal Revenue Service (IRS) uses a formula to determine whether people who are neither U.S. citizens nor permanent residents should be considered residents for taxation. This is called the "substantial presence test." One of its criteria includes the question of whether an individual has spent 183 days in the U.S. based on a calculation that considers their combined physical presence in a given tax year and the two years prior.
Key Takeaways
- The 183-day rule refers to criteria used in many countries to determine tax residency of individuals.
- In general, individuals are considered residents if they are physically present in a country for at least 183 days in a calendar year.
- The U.S. Internal Revenue Service uses a more complicated formula, which considers both presence in a given year, as well as a fraction of presence in the two prior years.
- The U.S. has tax treaties with other countries which concern what taxes individuals owe and to whom, as well as what exemptions may apply.
- U.S. citizens and residents may exclude up to $120,000 of their foreign-earned income in 2023 if they meet the physical presence test for and paid taxes in a foreign country.
Understanding the 183-Day Rule
Many countries around the world use the 183-day threshold to broadly determine whether to tax someone as a resident, because it marks the majority of a year. 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.
Each nation maintaining a 183-day rule has its own criteria for applying it in practice. For example, some use the calendar year for the accounting period, whereas others use a fiscal year. Some include the day the person arrives in the country, others do not.
Some countries have even lower thresholds that trigger tax residency. For example, Switzerland considers you a tax resident if you have spent more than 90 days there.
The IRS and the 183-Day Rule
The IRS uses a more complicated formula to determine whether someone passes its substantial presence test, and is subject to U.S. taxes, as a result. The person in question must:
- Have been physically present for at least 31 days during the current year; and
- Be present for 183 days during the three-year period that includes the current year and the two years immediately preceding it.
The 183-day presence threshold is not based off a total sum of days present. Rather, it is calculated by adding the following:
- All of the days an individual was present during the current year
- One-third of the days they were present during the previous year
- One-sixth of the days they were present in the year before that
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
- Days in which you qualify as exempt, which includes foreign-government-related persons under an A or G visa, teachers and trainees under a J or Q visa; a student under an F, J, M, or Q visa; and a professional athlete competing for charity
U.S. Citizens and Resident Aliens
Strictly speaking, the 183-day rule does not apply to U.S. citizens and permanent residents, who are required to file tax returns regardless of their country of residence or the source of their income.
However, such individuals may exclude at least part of their overseas earned income (up to $120,000 in 2023) from taxation provided they meet a physical presence test in a foreign country and paid taxes there. To meet this physical presence test, the person needs to be present in the country for 330 complete days in 12 consecutive months.
Individuals residing in another country in violation of U.S. law will not be allowed to have their incomes qualify as foreign-earned.
U.S. Tax Treaties and Double Taxation
The U.S. has tax treaties with other countries that help determine jurisdiction for income tax purposes and to avoid double taxation. These agreements contain provisions for the resolution of conflicting claims of residence.
How Many Days Can You Be in the U.S. Without Paying Taxes?
The IRS considers you a U.S. resident if you were physically present in the U.S. on at least 31 days of the current year and 183 days during a three-year period. The three-year period consists of the current year and the prior two years. The 183-day rule includes all the days present in the current year (year 3), 1/3 of the days you were present in year 2, and 1/6 of the days you were present in year 1.
How Long Do You Have to Live in a State Before You’re Considered a Resident?
Many states use the 183-day rule to determine residency for state tax purposes, and what constitutes a day varies among states. For instance, any time spent in New York, except for travel to destinations outside of New York (e.g., airport travel), is considered a day. So, if you work in Manhattan but live in New Jersey, you may still be considered a New York resident for tax purposes even if you never spend one night there.
In addition, some states have special agreements whereby a resident who works in another state is only required to pay taxes in the state of their permanent residence, or where they are domiciled. It is important to consult the laws of each state that you frequent to determine if you are required to pay their income taxes.
How Do I Calculate the 183-Day Rule?
For most countries that apply a 183-day rule, you are a tax resident of that country if you spend 183 or more there. The United States, however, has a different criteria for applying a tax residency test. You are a tax resident if you were physically present in the U.S. for 31 days of the current year and 183 days in the last three years, including all days present in the current year, 1/3 of the days from the previous year, and 1/6 of the days from the year before that.
The Bottom Line
The 183-day rule refers to a common test used to determine tax residency. In most countries, individuals who are physically present for 183 days or more are considered residents for tax purposes. In the U.S., a "substantial presence test" is used to determine tax residency, and it's slightly more tricky than the common 183-day rule. It considers time spent in the U.S. in a given year, in addition to fractions of time spent in the U.S. in the two years prior. Lastly, many states use a 183-day rule to determine residency for local tax purposes. Consulting local and federal tax regulations and international tax treaties can help an individual determine their total tax obligations.
