When are you considered a taxable green card holder (even if you left)

4 min

Once you get a Green Card, you automatically become a US tax resident and you must declare your entire income to the US government.

You may have heard that the number of days you spend in the United States each year has some effect on whether or not you are a tax resident. But this is true only for people who have non-immigrant visas, discussed below. This is not true for green card holders. Even if you remain outside the US for an entire year, you’ll still need to report your entire worldwide income.

Green Card Holders

Any US citizen or any person holding a green card must file US tax returns and pay all US taxes. In the case of a green card holder, this remains so even if the green card has “expired” and the individual has not returned to the USA for many years. In certain cases, the failure to do the right things required under the tax laws can result in the imposition of very harsh tax consequences under the so-called “expatriation” rules. Proper tax advice should always be sought.

Green card holders are taxed in the same manner as US citizens – that is, they are subject to US income tax on their worldwide income regardless of the source of that income or where the green card holder is living at the time it is earned.  Aside from the tax dollars themselves, onerous tax filing obligations are required, including filing of so-called FBARs which can result in harsh imposition of penalties if not done properly or in a timely fashion.  The cost of professional tax advice and tax return preparation can be very high when international tax issues are involved, as is often the case with green card holders.

US Income Tax: How to Relinquish the Green Card

Even if the individual is not complying with the terms of maintaining the green card for purposes of the US immigration laws, continuing to hold the card still counts for US tax law purposes.

Under the US income tax rules about green card holders,  a foreign individual is considered a “resident alien” (thus subject to worldwide income tax) for any calendar year if the individual is a lawful permanent resident at any time during that calendar year. A lawful permanent resident is defined as an individual who has been lawfully granted the privilege of residing permanently in the United States as an immigrant following the immigration laws.

Many clients are under the mistaken belief that simply because their green cards have “expired” they are no longer US tax subjects. This is incorrect. The tax law is very precise on this topic. Under the US tax rules, once lawful permanent resident status is acquired, it is deemed to continue unless it is rescinded or administratively or judicially determined to have been abandoned.

A “rescission” of resident status generally occurs when there is a final administrative or judicial order of exclusion or deportation.   An administrative or judicial determination of “abandonment” of resident status may be initiated by the foreign person, the US Immigration authorities, or a US consular officer. In most cases, the individual initiates the abandonment of the card.

Form I-407 or Letter of Intent to Abandon Resident Status

Under the US tax rules, resident status is considered to be abandoned when the individual’s application for abandonment (INS Form I–407 “Abandonment of Lawful Permanent Resident Status”) or a letter stating the alien’s intent to abandon his or her resident status, along with the green card enclosed, is filed with the US Immigration authorities or a consular officer.   Most people go to the nearest US consulate or embassy with the required documents and turn them over to the US consular officer. A stamped copy of the I-407 is given to the individual by the consular officer and must be retained as proof that the card was formally and properly abandoned.

It is always recommended that the individual personally visit the US consulate or embassy to formally relinquish the green card since by doing so, he is present for every step of the process and can ensure that he receives proper proof of relinquishment.  If this is not possible, however, another method is available. If filing a letter of intention to abandon US resident status, with the green card enclosed is the method chosen, it must be sent by certified mail, return receipt requested (or a foreign country’s equivalent thereof).  A copy of the letter and the green card, along with proof that the letter was mailed and received, should be retained.

Don’t Forget –

• Persons planning to relinquish their green cards should thoroughly understand the rules regarding “expatriation”.  Holding a green card for an extended number of years can make relinquishing the card more complicated from a US tax perspective and, depending on the facts of the case, can result in the imposition of so-called “Exit Tax” liability as well as other US tax consequences.

• Look carefully at the rules for tax filings that are required (for example, Form 8854 and the final income tax returns reflecting dual-status tax years). These issues, as well as possible tax planning, should be discussed with a tax professional before the green card is abandoned.

• Abandoning one’s green card is irrevocable. Unless the individual holds a passport entitling him to the benefits of the US 90-day visa waiver program, the individual will be required to apply for an immigrant visa in order to enter the US in the future.


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