The dual-status year: half resident, half not, one return

A dual-status tax return covers a year in which you were both a US resident and a nonresident. The IRS defines a dual-status individual that way, and the year divides into two periods with different rules.

Different things, and that difference is the point of a dual-status tax return. For the part of the year you are a US resident, America taxes income from all sources. For the nonresident part, it taxes income from US sources only.

So foreign salary earned before you arrived usually stays outside the American calculation.

Foreign salary earned after you arrive does not.

The date the residence starts therefore decides a great deal.

Source matters only in the nonresident half. In the resident half it makes no difference where the money came from, which is why the date of the split carries so much weight.

Several of the most valuable ones go missing on a dual-status tax return. The IRS says you cannot use the standard deduction, you cannot file a joint return, and you cannot use the head of household tax rates.

Itemised deductions remain available for allowable items.

For somebody with few itemised deductions, losing the standard one is a real cost.

So the arithmetic has to be run rather than assumed.

Credits can narrow as well. Several of the family and education credits are restricted for part of a dual-status year, so check each one against the period it relates to.

Because the status applies to the individual rather than to the household. The IRS states the restriction directly. One exception survives: a dual-status individual whose spouse is a US citizen or resident can join an election to file jointly for the whole year.

That election brings worldwide income into the return for the full year.

It also unlocks the standard deduction and the joint rate scale.

So the exception frequently beats the split-year treatment it replaces.

So raise it with your spouse early. The election binds both of you for the year and brings their worldwide income into the American calculation alongside yours.

Married filing separately, for most people in this position. The IRS says a nonresident married to a US citizen or resident who does not file jointly must use the married filing separately column or schedule, and cannot use the joint or single tables.

That status carries the lowest thresholds in the system.

Our guide to married filing separately with a UK spouse covers what that means in practice.

So the rules generally pick the status for you rather than leaving a choice.

In the year you arrive or the year you leave, if residence starts or ends part-way through it. A green card granted in June, or a first year in which your days in America cross the substantial presence threshold, both produce a split.

Leaving works the same way in reverse.

Our guide to the substantial presence test helps with the day count.

So ask when residence began or ended, not when you moved house.

In our practice the date people assume is rarely the date that counts. Residence can start later than your arrival, because the tests look at days and status rather than at intention. That gap is worth establishing before the figures go anywhere.

Generally yes, with carve-outs that matter. A day of presence usually counts in full, but transit of less than 24 hours between two places outside the United States is an excluded day.

Several other categories of day fall outside the count too.

Treating every calendar day as a counting day is a common and expensive error.

So work through the exclusions before concluding that residence started.

A day-count worksheet with the exclusions built in is quicker than working through them on paper, and it leaves a record of how the figure was reached.

In some circumstances, and the choice is worth pricing. Elections exist that treat an arriving individual as a resident for the full year, which restores the standard deduction and, with a spouse, joint filing.

The cost is bringing a full year of worldwide income into the American calculation.

Where foreign tax already sits on that income, the credit absorbs much of the American charge.

So the election is frequently better than it first sounds.

In practice the election suits an arrival with a working spouse and foreign tax already paid. It suits a single arrival with untaxed foreign income far less.

A dual-status tax return uses one form for the figures and the other as support. The convention is that a dual-status individual files one as the return and attaches the other as a statement, depending on status at the end of the year. Form 1040-NR covers the nonresident side.

Everything reaches the IRS once, and nothing goes in twice.

Our guide to filing a US return from abroad covers the ordinary case.

So the paperwork is unusual rather than voluminous.

Label the statement clearly and keep the working behind each period. A return that cannot be read apart into its two halves invites a question that is tedious to answer later.

Sometimes, and only for the resident part. The exclusion applies to foreign earned income while you are within the American system, so it can shelter foreign salary earned after residence began if you meet one of the qualifying tests.

Those tests are hard to satisfy in a year of arrival in America.

Our guide to the bona fide residence test sets out what they require.

So the exclusion is rarely the answer in a year of moving to America, and often is in a year of leaving.

Also check the qualifying window rather than the calendar year. A twelve-month period that straddles two years can turn an impossible claim into a workable one.

That generally survives and does real work. Foreign tax paid on income America also taxes can relieve the American charge in the ordinary way, which matters most for the resident part of the year.

The categories and limitations apply as usual.

Our guide to the foreign tax credit carryover covers any surplus.

So the credit is usually the main relief available in a split year.

In short, the credit does the heavy lifting in a split year. The exclusion rarely can, and the standard deduction is simply not there.

Only for people who meet the covered expatriate tests, which is a narrower group than the anxiety around it suggests. A long-term green card holder giving up that status is the usual candidate.

The thresholds are specific and worth checking rather than guessing.

Our guide to the exit tax and covered expatriates sets them out.

So the split-year question and the expatriation question are separate, and only some people face both.

Also check how long the green card has been held. The long-term test turns on years of status rather than on wealth, and people often qualify without realising it.

A sequence that keeps the two halves straight.

It has its own version, and the two do not line up. British split-year treatment works through specific cases within the statutory residence test, and it depends on the facts of the move rather than on the American analysis.

The tax years themselves also differ, one calendar and one ending in April.

Our guide to split-year treatment when leaving covers the British side.

So both countries may split the year, at different points, on different tests.

Our UK Self Assessment service handles the British half, which in a year of moving is usually the half with the tighter deadline.

Consider a British executive who moved to New York in July on an assignment, with a British salary for the first half of the year and an American one for the second.

On the split-year basis her British earnings before arrival stayed outside the American calculation. That looked attractive until we priced the lost standard deduction and the separate filing status.

Electing full-year residence, with the foreign tax credit covering the British tax she had already paid, produced a lower combined bill.

These figures are illustrative. The pattern is common: the split year is not automatically the cheaper answer, and nobody finds out without running both.

The first claims the standard deduction, which a dual-status return does not allow.

The second files jointly without the election that makes it possible.

The third fixes the split date by the removal van rather than by the residence test.

The fourth never prices the full-year election, which for a married arrival is frequently the better answer.

We fix the residence dates first, because every other figure in the return depends on them and the moving date is rarely the right one.

Then we price the split year against the full-year election, which on a married arrival is usually where the money is.

Our US federal returns service covers the filing, and fees stay fixed and agreed in writing. How we work sets out the process.

If you moved in either direction part-way through a year, talk to us before the return goes in.