Navigating Dual-Status Return Filing: When You’re Both Resident and Nonresident in One Year

📌 What Is a Dual-Status Return?

A dual-status return applies when you are considered both a resident alien and a nonresident alien within the same tax year. This usually happens in the year of immigration or emigration, or when a taxpayer changes residency status under the Green Card Test or Substantial Presence Test.

Unlike full-year residents, dual-status taxpayers must split their tax reporting between the periods of nonresidency and residency.

⚖️ When Does Dual-Status Apply?

Common situations where dual-status applies include:

• You arrive in the U.S. midyear and meet the Substantial Presence Test or receive a green card.
• You leave the U.S. midyear and give up green card status or fail to meet residency tests thereafter.
• You qualify for the First-Year Choice or Closer Connection Exception, creating split residency.

📝 How to File a Dual-Status Return

Filing requirements for dual-status returns are unique. Depending on whether you are a resident or nonresident at the end of the year:

• If Resident at Year-End: File Form 1040 with a statement (Form 1040-NR or equivalent) attached showing income for the nonresident portion.
• If Nonresident at Year-End: File Form 1040-NR with a statement (Form 1040 or equivalent) attached for the resident portion.

Each portion requires you to separately calculate income and deductions applicable during residency and nonresidency periods.

💡 Income and Deduction Rules

Reporting rules differ based on residency status:

• Nonresident Portion: Report only U.S.-source income (e.g., wages from U.S. employers, U.S. rental income, dividends from U.S. corporations).
• Resident Portion: Report worldwide income just like any U.S. resident.
• Deductions: Limited during the nonresident portion but expanded once residency begins.

📊 Example Scenario

Imagine you moved to the U.S. on July 1, 2025 and became a tax resident under the Substantial Presence Test. From January 1 to June 30, you are a nonresident alien, and from July 1 to December 31, you are a resident alien.

In this case, your dual-status return would:

• Report only U.S.-source income for the nonresident half of the year.
• Report worldwide income for the resident half of the year.
• Require you to attach a statement showing both sets of computations.

🚫 Limitations of Dual-Status Filing

• You cannot file jointly with your spouse (unless making the election to be treated as a full-year resident).
• You cannot claim the standard deduction (itemized deductions only).
• Tax treaty benefits may still apply but require careful application.

✅ Key Tips for Taxpayers

• Keep detailed records of arrival and departure dates to establish residency periods.
• Use the First-Year Choice if beneficial to simplify filing.
• Attach all required statements to avoid IRS rejection.
• Consult with an international tax advisor to minimize tax liability.