Individual Income Taxes in the US
By Aaron N. Wise, Attorney at Law © 2009
The rates vary, depending on whether the person is married, single or unmarried head of household. The amount of income tax can vary depending on which state of the U.S.A. one works in and where on lives. A small handful of the fifty states have no personal income tax for individuals.
For U.S. tax purposes, the rule is that a foreign individual who is considered to be a U.S. tax resident is subject to U.S. income tax on his or her worldwide income. An individual is deemed to be a resident of the U.S.A. for purposes of U.S. federal income tax if
- he or she holds a U.S. permanent resident visa ("green card"), or
- he or she was present in the U.S.A. for at least 183 days during the latest tax year. Even if the above tests are not met, if the individual was present in the USA in the latest tax year for at least 31 days, then the following formula is applied: number of days present in the USA. in the latest tax year, plus 1/3 of the total days present in the USA during the immediately preceding tax year; plus 1/6 of the total days present in the USA in the tax year immediately preceding that one. If the total is at least 183 days, the person is considered to be a resident for U.S. federal income tax purposes for the latest tax year. This is hereafter referred to as the "cumulative days test". Thus, if Mr. X, a citizen of a country other than the USA, was present in the USA for 160 days in the latest tax year, 54 days in the immediately preceding year and 30 days in year before that, the calculation would be 160 plus 18 (1/3 of 54) plus (1/6 of 30), totaling 183 days. Mr. X would be considered a resident for U.S. federal income tax purposes for the latest tax year, unless it is established that he has a closer tax connection to another country (e.g., the country of which he is a citizen). The cumulative test is avoided if the foreign national is not present in the USA for more than 121 days during any calendar year; or, as stated above, if he establishes that he has a closer tax connection to his home country than the USA, based on the relevant facts and circumstances. The length of the alien's permitted U.S. stay under his non-immigrant visa may be influential in connection with the closer tax connection test.
If the employee not treated as a U.S. tax resident earns compensation for his services from his U.S. employer, that income, because it derives from a U.S. source (and certain other types of U.S. source income), will normally be subject to U.S income tax at the same rates as a U.S. citizen or permanent resident would pay but is permitted only limited deductions. As a tax non-resident, he is not subject to U.S. income tax on his non-U.S. source income.