1040 (NR) or 1040 (Resident) - Which return should a US Green card Holder residing abroad file?
Are you a green card holder residing outside USA, know which return is to be filed? (1040 NR or 1040 Resident)
U.S. Tax Implications for Green Card Holders & Resident Aliens
If you hold a U.S. Green Card or qualify as a resident alien, you are subject to U.S. taxation on your worldwide income, just like U.S. citizens. However, to avoid double taxation, you may benefit from: ✅ Foreign Earned Income Exclusion ✅ Housing Cost Exclusion/Deduction ✅ Foreign Tax Credit
🔹 Tax Treaties & Residency: Green Card holders may claim tax treaty benefits but must comply with strict reporting rules. Filing Form 1040NR (Non-Resident Return) could raise questions about your residency status and trigger IRS scrutiny.
🔹 Residency Termination Risks:
Abandoning Green Card: Requires USCIS Form I-407 or formal notification. Simply not filing taxes as a resident does not terminate tax residency. Filing 1040NR: May be seen as claiming non-resident status, potentially affecting legal standing.
🔹 Key Differences in Taxation for Non-Resident Aliens (1040NR):
Only U.S.-sourced income is taxed (e.g., salaries, rental income, dividends). No standard deduction, and itemized deductions are limited.
Potential higher tax rates compared to residents. Missteps can lead to hefty IRS penalties (starting at $10,000 per missed form). If you’re an NRI with U.S. ties, understanding these tax implications is crucial to staying compliant!
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Read More1040 (NR) or 1040 (Resident) - Which return should a US Green card Holder residing abroad file?
Are you a green card holder residing outside USA, know which return is to be filed? (1040 NR or 1040 Resident)
U.S. Tax Implications for Green Card Holders & Resident Aliens
If you hold a U.S. Green Card or qualify as a resident alien, you are subject to U.S. taxation on your worldwide income, just like U.S. citizens. However, to avoid double taxation, you may benefit from:
✅ Foreign Earned Income Exclusion
✅ Housing Cost Exclusion/Deduction
✅ Foreign Tax Credit
🔹 Tax Treaties & Residency: Green Card holders may claim tax treaty benefits but must comply with strict reporting rules. Filing Form 1040NR (Non-Resident Return) could raise questions about your residency status and trigger IRS scrutiny.
🔹 Residency Termination Risks:
Abandoning Green Card: Requires USCIS Form I-407 or formal notification. Simply not filing taxes as a resident does not terminate tax residency.
Filing 1040NR: May be seen as claiming non-resident status, potentially affecting legal standing.
🔹 Key Differences in Taxation for Non-Resident Aliens (1040NR):
Only U.S.-sourced income is taxed (e.g., salaries, rental income, dividends).
No standard deduction, and itemized deductions are limited.
Potential higher tax rates compared to residents.
Missteps can lead to hefty IRS penalties (starting at $10,000 per missed form). If you’re an NRI with U.S. ties, understanding these tax implications is crucial to staying compliant!
Also Read: How can US NRI Comply with PFIC and FBAR Rules on Indian Investments?