Tax and residency

Tax treaty

Also called double tax treaty, income tax treaty, treaty tie-breaker, tie-breaker rule.

A tax treaty is a bilateral agreement that allocates taxing rights between two countries, and its residence tie-breaker article decides which of them may tax a person on worldwide income, a choice that for a green card holder reaches well past the tax bill into expatriation tax and into whether the green card itself survives.

What it decides

A green card holder is a US tax resident on worldwide income whatever a treaty says, until the tie-breaker is actually claimed, and claiming it is expensive. Under 26 CFR 301.7701(b)-7 the investor becomes a dual resident taxpayer, files Form 1040-NR with a completed Form 8833 disclosing the position under 26 U.S.C. 6114, and is taxed as a nonresident for that period while staying a US resident for other Code purposes such as the controlled foreign corporation rules. Under 26 U.S.C. 7701(b)(6) the person then ceases to be treated as a lawful permanent resident for tax purposes. If they are a long-term resident, meaning a lawful permanent resident in at least 8 of the last 15 taxable years, that counts as expatriation, and the mark to market exit tax follows if they are a covered expatriate, which includes anyone with a net worth of $2,000,000 or more. The immigration side is worse. The regulation itself warns that filing this way may affect whether the person keeps the residency permit, and 8 CFR 316.5(c)(2) makes a voluntary nonresident claim a rebuttable presumption that permanent resident status has been relinquished.

Governed by 26 U.S.C. 7701(b)(6), 877A(a)(1), (g)(1), (g)(2) and (g)(5), 877(a)(2) and (e)(2), and 6114, read on uscode.house.gov. 26 CFR 301.7701(b)-7(a)(1), (a)(3), (b) and (c)(1)(i), and 8 CFR 316.5(c)(2), read through the eCFR renderer API. IRS, About Form 8833, last updated 30 March 2026. The 8 of 15 year long-term resident test is at 877A(g)(5), which points to 877(e)(2). It is not at 877A(g)(3), which defines the expatriation date.

Related terms

Exit tax and expatriationThe exit tax is the mark to market charge under 26 U.S.C. 877A that treats all property of a covered expatriate as sold at fair market value on the day before they give up US citizenship or long-term US permanent residence.
State income taxState income tax is a second layer of income tax that most US states charge their residents on all income wherever earned, with residence fixed by each state's own statute rather than by the federal residency tests or by immigration status, so an EB-5 family can become resident of a state on facts that have nothing to do with the green card.
Worldwide incomeWorldwide income is the rule that a United States resident for tax purposes, including a green card holder whose residence is still conditional, is taxed on income from every source anywhere in the world and not only on income arising inside the United States.
Abandonment of residenceAbandonment of residence is the loss of lawful permanent resident status that follows from conduct showing the holder no longer intends to make the United States a permanent home, most often moving abroad for good, staying out on what is no longer a temporary visit, or claiming nonresident status on a US tax return.
Nonresident alien and resident alienResident alien and nonresident alien are the two United States income tax statuses a non-citizen can hold: a resident alien is taxed on worldwide income and files Form 1040, while a nonresident alien files Form 1040-NR and is taxed only on income effectively connected with a United States business and on United States source passive income.

Checked against primary sources on 10 August 2026. Back to the glossary