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Consider the following context:
Person A is moving to the US in July of 2022, formerly not tax-liable in the US (non-reisdent alien). They start a regular employment in the US for the remainder of the year, holding a valid immigration visa, and are now considering the US tax return with the IRS.

I am fairly sure that it is not possible to deduct the full amount for the standard deduction on the tax return, if one moves to the US throughout the year as a former non-resident alien.
According to my own investigations, the IRS itself lists various exemptions on who can claim the full deductions, where the two following scenarios are primarily relevant for the given situation:

[Not Eligible for the Standard Deduction are:] [...]
2. An individual who was a nonresident alien or dual status alien during the year (see below for certain exceptions)
3. An individual who files a return for a period of less than 12 months due to a change in his or her annual accounting period

However, I am unsure whether (3.) is relevant here, as I could not find any clear information on the referenced "change in his or her annual accounting period" expression. Is this a concept mainly relevant for businesses, or is it something that can be applied to regular W-2 incomes of individuals as well?

Mainly, however, I am interested in how the standard deduction will instead be available: Is there a "pro rata temporis" regulation, i.e., allowing a fractional amount of the standard deduction by number of months/days instead? Or is the deduction forfeited completely?

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    I suspect the answer is "If you want deductions for the partial year, you need to itemize."
    – keshlam
    May 26, 2023 at 16:17
  • If 2) is relevant (which it sounds like it is) does it matter if 3) is relevant?
    – D Stanley
    May 26, 2023 at 16:39
  • I presume you intend to move in July 2023?
    – Jon Custer
    May 26, 2023 at 18:40

3 Answers 3

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First of all, you need to determine whether you are a resident alien or nonresident alien, and if you are a resident alien, whether you are a resident alien for only part of the year. You are a resident alien if you pass the Substantial Presence Test or the Green Card Test.

I am not sure what you mean by "immigration visa"; if it was an "immigrant visa", then the person would be a US permanent resident (i.e. green card holder) immediately upon entry, and pass the Green Card Test for 2022 and thus be a resident alien. However, if they were a nonresident alien in 2021, then First Year of Residence rules apply, and they would be a dual-status alien, being resident after they got their green card or first day of presence (if they also pass the Substantial Presence Test), and nonresident alien before.

If you mean a nonimmigrant visa, you will have to consider their days of presence in the US in 2022, 2021, and 2020 to determine whether they pass the Substantial Presence Test for 2022. If they arrived after July 4, 2022, and was not present in the US before that in 2022, 2021, or 2020, then they would not pass the Substantial Presence Test for 2020, and would be a nonresident alien for all of 2022 unless they use the First-Year Choice to become a dual-status alien, being resident after they came to the US. If they do pass the Substantial Presence Test, they would be resident, but if this is the first year they are resident, then again, First Year of Residence rules would apply, so they would be a dual-status alien.

Nonresident aliens and dual-status aliens cannot use the standard deduction, and cannot file jointly if they are married. In the above cases where the person was a dual-status alien, if they were married, they could choose to use either the Choosing Resident Alien Status (if both spouses were resident at the end of the year) or Nonresident Spouse Treated as Resident (if only one spouse was a resident at the end of the year) elections, either of which would cause both spouses to be treated as residents for the whole year, and they must file jointly.

In the cases where they are a resident alien for all of 2022 (because they pass either the Substantial Presence Test or Green Card Test for 2022 and was a resident alien also in 2021, so the first-year rules do not apply, or because they used one of the elections for married people to be treated as resident for the whole year), they can use the standard deduction, and they get all of it.

However, a sort-of "prorated" partial standard deduction might still come into play. When the people are treated as resident for the whole year, and they had foreign income from the part of the year before they came to the US, they will use either the Foreign Earned Income Exclusion (using the 12-month period before they came to the US to qualify) and/or the Foreign Tax Credit to reduce or eliminate US taxes on their foreign income during that period of time. If they use the Foreign Tax Credit, then they effectively lose a share of the standard deduction corresponding to the share of the income that they get credit for (so it's "prorated" on income, not on days of residence).

To see this, see Form 1116 for the Foreign Tax Credit. For a given category of income and country, on line 3a, you put the standard deduction or itemized deduction you had for the year, and that gets added with other deductions into line 3c. On line 3f, you calculate the fraction of that country's income out of all income from all countries. On line 3g, you multiply line 3c by 3f, which is the share of the standard/itemized deduction prorated with the share of income that comes from that country. For simplicity let's say that half your income came from the foreign country that you can get Foreign Tax Credit for, so half your standard deduction would be in line 3g. This gets added into line 6 and subtracted from line 1a in line 7, the taxable income attributed to foreign countries. This gets rolled into line 15 and then line 17, which is then divided by line 18 (your entire taxable income, which is your entire income minus your entire standard deduction), to get line 19, the portion of your taxable income attributed to foreign countries, which should be exactly half, since your entire taxable income is your entire income minus your entire standard deduction, and your foreign taxable income is half your income minus half your standard deduction. Then in line 21, you multiple line 20 (your total tax) by line 19, to get the prorated part of the tax attributed to foreign countries, which is an upper bound on the Foreign Tax Credit you get. So if the foreign tax is higher than the US tax, than this is the credit you get. But remember that your total tax is based on the taxable income where you got to subtract your entire standard deduction. By now getting a credit for half the tax, you are effectively losing the effect of half of the standard deduction, since you get no benefit from the half that went to reducing the foreign taxable income, because you get credit for the portion of tax from that anyway.

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No, in this situation you'll be filing a dual-status return (which is exception #2), and you'll have to itemize the deductions. There's no "pro-rata" standard deduction, you either elect to take it in full if it is available, or it is not available like in your scenario.

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That person is more likely than not either a non-resident alien or a dual-status alien for 2022 barring any exceptions that would make them a full-year resident. See IRS Pub 519 pages 7-9 and chapter 6 starting on page 31.

Therefore, no standard deduction is allowed and certain itemized deductions may be limited as well.

There's an exception under a specific tax treaty for certain alien taxpayers from India (there may be others as well), where the standard deduction can be taken.

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    "They met the substantial presence test for 2022" If they moved to the US in July 2022 after July 3, and have not been in the US in 2021 or 2020, then they do not meet the Substantial Presence Test for 2022.
    – user102008
    May 26, 2023 at 16:53
  • @user102008 you're right, misread July as June.
    – Stan H
    May 26, 2023 at 17:12

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