Is 'residency start date' the date my spouse's foreign income became reportable/taxable?

[turb0tax_newbie]

Hi everyone,

Thanks in advance for any advice on this question.

I am wondering if the date that my husband arrived in the US (on a CR1 visa) - which is the same date as he obtained his green card - is the same date that his income became reportable and taxable? He did NOT meet the substantial presence test for the year he arrived. My understanding is therefore that his residency started on the date he arrived?

Here is what I have found in the IRS guidelines, with the key part in bold, which makes me think this is correct: https://www.irs.gov/individuals/international-taxpayers/residency-starting-and-ending-dates

"If you meet the green card test at any time during a calendar year, but do not meet the substantial presence test for that year, your residency starting date is the first day in the calendar year on which you are present in the United States as a lawful permanent resident (the date on which the United States Citizenship and Immigration Services (USCIS) officially approved your petition to become an immigrant)."

Similarly, on this page: https://www.irs.gov/individuals/international-taxpayers/taxation-of-dual-status-aliens

"For the part of the year you are a U.S. resident alien, you are taxed on income from all sources. Income from sources outside the United States is taxable if you receive it while you are a resident alien."

Income from sources outside the United States that is not effectively connected with a trade or business in the United States is not taxable if you receive it while you are a nonresident alien."

So, for example, if he arrived on 1st September, does that mean his income (all foreign) from Jan-August does not need to be reported (and is not taxed) at all? Is anyone able to confirm or deny whether this is correct? If correct, can we file Married Filing Jointly and we simply don't include my husband's income before his residency start date?

To give some more context: the income in question is rental income from our foreign rental property (which was always paid into his individual foreign bank account). I am trying to work out when this rental income became reportable, and also how to determine the 'placed in service' date for depreciation purposes (I'm assuming those two things can be considered to occur on the same date?)

BTW: I am assuming the rental income was not reportable by me because I wasn't the one receiving it: as taken from https://www.taxesforexpats.com/expat-tax-advice/foreign-spouse.html

"If your non-resident spouse has foreign income from assets (e.g., rental income, capital gains, etc.) and you file as married filing separately or as head of household, this income is not a subject to U.S. income tax. If you file jointly, you must report this income on U.S. tax return." [In previous taxed years before he moved to the US, I filed Married Filing Separately and he did not file at all.]


I hope this makes sense. Thanks again to anyone who can offer any help on any of this!

[SusanY1]

If you are a resident alien or citizen but your spouse is not, filing jointly would require electing resident filing status for him which subjects all of his worldwide income to reporting (and potential tax) for the full year.

Otherwise, you can file separately and then he reports his income on 1040NR (to file see: https://sprintax.com) in order to exclude the income earned prior to arrival.  

[turb0tax_newbie]

Thank you for your reply! This was very helpful - I think filing separately, and him submitting both a 1040NR *as well as* a 1040 may be the correct way to go!

Some sources I've found:

"Dual-Status Tax Year
If your status changes during the year from resident alien to nonresident alien or vice versa, you generally have a dual-status tax year. This usually happens in the year when you arrive in or depart from the United States. Your tax on the income for the two periods will differ under the provisions of the laws that apply to each period. See Publication 519, U.S. Tax Guide for Aliens for more information about dual-status aliens."
https://www.irs.gov/taxtopics/tc851

"How to File Dual-Status Tax Return
How you file your taxes depends on which parts of the year you held each status, and you will fill out two forms for the return. As a resident alien at the end of the year, you will file Form 1040 with “Dual-Status Return” written at the top, along with Form 1040NR attached, which serves as a statement showing any U.S. income; you’ll then write “Dual-Status Statement” at the top of the 1040NR.

As a nonresident alien at the end of the year, you will do the opposite and file Form 1040NR as the return and use Form 1040 as the statement—again, with the corresponding dual-status labels for each written at the top."
https://www.taxslayer.com/blog/dual-status-tax-return-file/

Thanks again!