Closer-Connection Exception Explained: When You Can Still Be a Nonresident

📌 What Is the Closer-Connection Exception?

Even if you meet the Substantial Presence Test (SPT), you may still avoid being treated as a U.S. resident for tax purposes by claiming the Closer-Connection Exception. This rule applies if you can demonstrate that your tax home and closer personal and economic ties are with another country.

The main tool to claim this exception is IRS Form 8840 (Closer Connection Exception Statement for Aliens).

📝 Requirements for Claiming the Exception

• You must be present in the U.S. for fewer than 183 days during the current year.
• You must maintain a tax home in a foreign country.
• You must demonstrate a closer connection to that country than to the U.S.
• You must file Form 8840 with the IRS on time (generally by your tax return due date, including extensions).

🌍 What Counts as a Tax Home?

Your tax home is your principal place of business or employment, regardless of where you maintain a family home. If you do not have a regular place of business, your tax home is where you regularly live.

Example: A Canadian consultant spends 120 days in the U.S. in 2025 but maintains a primary office, family residence, and bank accounts in Toronto. Their tax home remains in Canada.

📑 Filing Form 8840

To claim the Closer-Connection Exception, you must file Form 8840 with your U.S. tax return. The form requires you to list:

• Your foreign tax home address.
• Details of your ties to the foreign country (family, property, employment, financial accounts).
• The number of days you spent in the U.S. during the current and prior years.

Failure to file this form on time means you could be classified as a resident alien, even if you meet all requirements.

📊 Scenarios Where the Exception Applies

• Short-term work assignments: Professionals working temporarily in the U.S. but maintaining a permanent home abroad.
• Seasonal visitors: Individuals spending time in the U.S. for less than 183 days but retaining stronger ties abroad.
• Students on extended stay: Those transitioning to work visas but keeping permanent residency and family overseas.

🚫 When You Cannot Use the Closer-Connection Exception

The exception is not available if you:

• Are in the U.S. for 183 days or more in the current year.
• Have taken steps to become a lawful permanent resident (Green Card holder).
• Fail to establish a tax home in another country.

✅ Key Takeaways

• Meeting the Substantial Presence Test does not always mean U.S. residency.
• Form 8840 is the official method to claim a closer connection.
• Always file on time to preserve your nonresident status.
• Keep strong evidence of your ties abroad (bank statements, property deeds, employment contracts).