Most people have one tax status for the whole year - you're either a US resident or you're not. The year you arrive in the US (or leave) is different. You're a non-resident for part of the year and a resident for the rest. The IRS calls this dual-status, and it requires a specific kind of return that's part 1040 and part 1040-NR. The mechanics catch a lot of new arrivals (and emigrants) off guard, particularly because the dual-status return loses several deductions and credits that a regular 1040 would get.
A dual-status return combines two periods - the part of the year you were a non-resident (taxed only on US-source income) and the part you were a resident (taxed on worldwide income). It's filed as a Form 1040 with a Form 1040-NR attached as a statement, or vice versa, depending on how the year ended.
You're dual-status in the calendar year you become or stop being a US resident. Two patterns:
You moved to the US during the year and met the Substantial Presence Test (SPT) or got a green card. The day before you became a resident, you were a non-resident. The day you became a resident, your status changed.
Residency start date under IRC §7701(b)(2)(A):
You left the US during the year and stopped meeting the SPT or formally abandoned your green card. The day you left was your last day as a resident.
Residency termination date under IRC §7701(b)(2)(B):
Dual-status returns aren't a separate form. They're a hybrid of Form 1040 and Form 1040-NR, with one designated as the primary form and the other attached as a statement.
You ended the year as a US resident. The primary form is Form 1040, with "Dual-Status Return" written across the top. The 1040 reports your worldwide income for the residency period. You attach a Form 1040-NR labeled "Dual-Status Statement" reporting US-source income for the non-resident period.
You ended the year as a non-resident. The primary form is Form 1040-NR, marked "Dual-Status Return." The 1040-NR reports US-source income from the non-resident period. The attached Form 1040 (labeled "Dual-Status Statement") reports your worldwide income for the residency period.
Dual-status filers can't take several items that regular 1040 filers get:
This is the big one. A dual-status filer has to itemize. If actual itemized deductions (state taxes, mortgage interest, charitable contributions) are less than the standard deduction would have been, you pay tax on more of your income than a comparable single-status resident would.
One narrow exception: a non-resident alien who is a resident of India for purposes of the US-India treaty can claim a standard deduction on the 1040-NR portion. Other treaties don't have this carve-out.
Dual-status filers cannot file as Head of Household, even with qualifying dependents.
A dual-status filer cannot file jointly with a spouse - by default. Each spouse files separately, which often produces a worse result than joint filing because of the way married-filing-separately tax brackets work.
Two elections under §6013 fix this:
Both elections eliminate the dual-status return for the electing spouse and allow standard joint 1040 filing. The trade-off: the non-resident spouse's worldwide income for the entire year becomes US-taxable.
You report all worldwide income earned or received during your residency period. This includes US-source wages, business income, investment income, plus all foreign-source income earned during the residency period (foreign wages, foreign dividends, foreign capital gains, foreign rental income).
You report only US-source income, taxed under non-resident rules:
Foreign-source income during the non-resident period is generally not reported - you weren't a US person for that period.
Sourced to where the work is physically performed. A Canadian who moves to New York on March 1 and works in New York from March 1 onward has US-source wages from March 1, regardless of when the paycheck arrived. Wages for work performed before March 1 in Canada remain Canadian-source even if paid by a US employer after the move.
Sourced to the residence of the payer. Interest from a Canadian bank during the non-resident period is foreign-source and not reportable. The same Canadian-bank interest during the residency period is foreign-source but reportable as worldwide income.
Sourced to the country of the issuing corporation. US-corporation dividends during the non-resident period are US-source FDAP, generally subject to 30% withholding (or lower treaty rate). US-corporation dividends during the residency period are worldwide income reported on the 1040.
For non-resident aliens, capital gains on personal property generally aren't US-source unless the seller is physically present in the US for 183 days or more during the year. For residents, capital gains are worldwide income.
One common complication: a stock sold in the residency period that was bought before the move. The full gain is US-taxable in the residency period. Foreign tax paid on the same gain is creditable, subject to FTC limitation.
Here's something that frustrates new US residents: there is no automatic basis step-up on assets when you become a US person. Stocks held since 2010 are still treated as having been bought in 2010 for US purposes, even if you became a US resident in 2024.
This means: if you sell post-arrival, the entire historical gain is US-taxable, even the appreciation that accrued during years you weren't a US person. Many cross-border practitioners recommend selling appreciated foreign assets in the year before becoming a US resident, then repurchasing them after the move. This crystallizes the pre-arrival gain in a non-US-taxable year and resets the cost basis upward.
Some dual-status filers can avoid the dual-status return entirely by claiming treaty residency throughout the year.
If a tax treaty has a residency tie-breaker (most do, including the US-Canada treaty Article IV), and you would be treated as a non-resident of the US under the tie-breaker for the entire year, you can file a Form 1040-NR for the full year and avoid the dual-status return.
This is most relevant for:
The treaty position is disclosed on Form 8833 attached to the return.
Note: this option is not available to US citizens. The treaty's savings clause (in most US treaties) preserves the US's right to tax citizens regardless of treaty residence claims.
States have their own residency rules and don't follow the federal dual-status pattern. Most states define residency based on domicile, days of presence, or a combination - and many states require a part-year resident return that doesn't mirror the federal dual-status structure.
For a year of US arrival or departure, expect to file:
State residency is independent of federal. You can be a federal dual-status filer and a full-year state resident if you were domiciled in the state on January 1 and didn't move out. The mismatch between federal and state rules in arrival and departure years is a frequent source of double counting and errors.
Always run the §6013(h) election analysis if you're married and you or your spouse moved to the US mid-year. The election often produces lower total tax than the default dual-status filing - but not always. Run both calculations.
Document your residency-start and residency-termination dates carefully. CBP entry/exit data, lease commencement, school enrollment, employment start dates, and visa stamps are the records the IRS will look at. Keep them.
Plan basis events before arrival. The lack of automatic step-up means appreciated foreign assets carried into US residency become fully US-taxable on disposition. The window to crystallize gains is the year before becoming a US resident.
Coordinate the home country's exit return. Canadian movers should be filing a final part-year T1 with the departure tax (T1243). UK movers may need to deal with the statutory residence test. Don't file the US dual-status return without addressing what happens on the other side.
The first year is harder than subsequent years. Once you've cleared the year of arrival or departure, you're a single-status filer (resident or non-resident) and the mechanics simplify dramatically. Don't try to apply year-of-arrival logic to ongoing residency years.