Green Card Holder Taxes: First Year, Foreign Income, FBAR

When a green card makes you a tax resident

Under the green card test, you are a U.S. resident alien for tax purposes if you are a lawful permanent resident at any time during the calendar year. Resident aliens are generally taxed on their worldwide income, the same as U.S. citizens. IRS Pub. 519

Your residency starting date

If you meet only the green card test, 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. If you also meet the substantial presence test, your starting date is the earlier of the two dates. IRS Pub. 519

That second rule matters if you adjusted status inside the U.S. Someone who lived here for years on an H-1B or L-1 visa has usually been a resident under the substantial presence test all along, so receiving the green card doesn't create a new first year.

How long it lasts

Residency under the green card test continues unless the status is taken away from you or is administratively or judicially determined to have been abandoned. You can abandon it by filing Form I-407 or a letter with your green card; until you have proof the filing was received, you remain a resident for tax purposes. IRS Pub. 519

Your first year: dual-status or full-year resident

If you arrive with a green card partway through the year and weren't already a resident under the substantial presence test, that year is generally a dual-status year. IRS: Dual-status individuals

• Resident part of the year: worldwide income is taxable, including foreign-source income you receive while you are a resident.
• Nonresident part of the year: U.S.-source income is taxable; foreign-source income that isn't connected with a U.S. trade or business is not taxable if you receive it while you are a nonresident.

For most people the date you receive the money matters, not only when you did the work. May salary from a foreign employer paid in June, after residency began, is generally taxable in the U.S. even though the work was done earlier.

Restrictions on a dual-status return

• No standard deduction; you can itemize certain deductions instead.
• No head of household filing status.
• No joint return, unless you make the election described below.

If you are a resident on December 31, you file Form 1040 marked "Dual-Status Return" and attach a statement for the nonresident part of the year; Form 1040-NR can serve as that statement. IRS: Dual-status individuals

The election to be residents for the whole year

A dual-status taxpayer married to a U.S. citizen or resident at the end of the year can choose, together with the spouse, to be treated as U.S. residents for the entire year. This section describes that first-year election under IRC section 6013(h); a different election under section 6013(g) applies when one spouse is still a nonresident alien at year-end, with its own rules. 26 U.S.C. § 6013 The rules that come with the 6013(h) election:

• both spouses are taxed on worldwide income for the whole year, including the months before arrival;
• you must file a joint return for that year;
• the dual-status restrictions above no longer apply, so the standard deduction is available;
• neither spouse can make this choice again for a later year.

The election can also change foreign reporting. For example, a nonresident alien who elects resident treatment for a joint return is a specified individual for Form 8938. Check each form separately rather than comparing only brackets and deductions. Form 8938 instructions

IRS Pub. 519

Example: which way is better?

Simplified illustration with assumed figures. A married couple receive green cards and arrive in the U.S. on June 1, 2026.

• January–May: one spouse earned and received $40,000 of foreign-source salary before U.S. tax residency began and paid foreign income tax on it.
• June–December: the same spouse earned $70,000 of U.S. salary; the other spouse had no income.
• Both use the cash method, had no earlier U.S. residency starting date and received no deferred foreign pay after arriving.

2026 standard deduction: Rev. Proc. 2025-32 via KPMG

Which option costs less depends on the numbers: how high the foreign tax was, how much the joint brackets and the standard deduction save, and whether foreign tax fully offsets the U.S. tax on the $40,000. It's worth calculating both before you file, because the election can't be repeated later. California follows its own residency rules, so the state picture may differ.

For the practical steps of the first year, see our tax checklist for your first year in the U.S.

Worldwide income and double taxation

Once you are a resident, U.S. tax applies to income from abroad as well as from the U.S.:

• salary for work done abroad;
• rent from property in your home country;
• interest and dividends from foreign bank and brokerage accounts;
• foreign pensions;
• gains from selling property or investments abroad.

Foreign income tax on that income can usually be claimed as a foreign tax credit on Form 1116, up to the U.S. tax on the same income. We explain the limit and the gaps, with examples, in double taxation for U.S. residents. For an apartment you rent out abroad, see also rental property tax deductions.

California

California taxes residents on all income regardless of source. FTB Pub. 1100 It gives no credit for taxes paid to a foreign country, so foreign income can carry state tax even when the federal tax is largely offset. FTB Schedule S instructions

Common foreign reporting forms

Reporting is separate from tax. You can owe nothing extra and still have to file these forms, and the penalties for missing them can be larger than the tax itself.

IRS: Form 8938 vs FBAR IRS: Gifts from foreign persons IRS: Form 8621

• Form 8938: generally not required if you don't have to file an income tax return (FBAR has its own test). Higher thresholds apply if you meet the Form 8938 requirements for living abroad: $200,000 at year-end or $300,000 at any time for single or married-filing-separately filers, $400,000 or $600,000 for joint filers. A foreign address alone doesn't qualify you. Failure to file can bring a $10,000 penalty, plus $10,000 for each further 30-day period if the failure continues more than 90 days after the IRS mails a notice, up to $50,000 more. Form 8938 instructions
• Form 3520: genuine gifts and inheritances are generally excluded from income, but reporting may still be required; the penalty is 5% of the gift's value for each month it goes unreported, up to 25%, unless there is reasonable cause. Gifts from related donors may have to be added together for the $100,000 test, and purported gifts from foreign corporations or partnerships can be recharacterized. Form 3520 also covers certain foreign trust transactions, with separate rules.
• Not a complete list. Owning a foreign business can trigger other forms. Gather full-year statements for every account and asset; the reporting period for each form is then determined separately.

Thresholds and deadlines for FBAR are covered in our FBAR filing requirements guide.

Living abroad with a green card

Moving abroad doesn't end U.S. tax residency by itself. As long as you keep the green card and it hasn't been abandoned or taken away, you are generally still taxed on worldwide income and still file FBAR and Form 8938 if you meet the thresholds. IRS Pub. 519

Two tools can reduce the tax while you live abroad:

• Foreign earned income exclusion: up to $132,900 of qualifying foreign earned income for 2026. Your tax home must be in a foreign country, and you must meet either the bona fide residence test or the physical presence test. For a green card holder the bona fide residence test also requires citizenship or nationality of a country with a U.S. income tax treaty; the physical presence test requires at least 330 full days in a foreign country or countries during 12 consecutive months. Time abroad alone isn't enough if your main personal and economic ties stay in the U.S. IRS: FEIE
• Foreign tax credit for income tax paid in your new country of residence.

Some taxpayers in this situation consider claiming foreign residency under a tax treaty tie-breaker rule. For a green card holder this is a serious step: Pub. 519 warns it can, in some cases, trigger the section 877A expatriation tax for long-term residents, and it can raise questions about whether you have kept your permanent residence. Get advice before taking that position.

Giving up a green card: termination and exit tax

Giving up a green card doesn't automatically require Form 8854. The expatriation rules and the initial Form 8854 apply to long-term residents (below). A long-term resident may have to file Form 8854 even if no expatriation tax is due. The form is due with the income tax return for that year; if no income tax return is required, Form 8854 may still have to be filed separately by the applicable deadline. Failing to file it when required can lead to a $10,000 penalty. Final-year income tax and foreign reporting are reviewed separately. Form 8854 instructions IRS: Expatriation tax

Long-term residents

The expatriation tax rules apply to long-term residents: green card holders who were lawful permanent residents in at least 8 tax years during the 15-year period ending with the year residency ends. The test counts tax years, not full anniversaries, so a partial year as a permanent resident can count. Years when you were treated as a resident of another country under a treaty, without waiving treaty benefits, don't count. 26 U.S.C. § 877(e)

Covered expatriate tests

A long-term resident who gives up the green card is a covered expatriate if any one of these applies:

• average annual net income tax liability for the 5 years before expatriation is more than $211,000 for 2026 (this is tax, not income);
• net worth of $2 million or more on the date residency ends;
• failure to certify on Form 8854 compliance with all federal tax obligations for the 5 preceding years.

Covered expatriates are generally treated as having sold their worldwide assets the day before expatriation (mark-to-market). The resulting gain is reduced by an exclusion amount of $910,000 for 2026. Rev. Proc. 2025-32 Deferred compensation, specified tax-deferred accounts such as IRAs, and interests in nongrantor trusts have separate rules, and the exclusion doesn't apply to every expatriation-related item. Form 8854 instructions IRS: Expatriation tax

Because these rules can turn a move abroad into a large tax bill, the year you plan to give up the green card is worth planning a year or two ahead. That is part of our tax planning services.

Checklist before you file

• Find your residency starting date: the first day in the U.S. as a permanent resident, or an earlier substantial presence date.
• For a mid-year arrival, compare a dual-status return with the full-year resident election before choosing.
• Gather foreign income documents for the resident part of the year, converted to U.S. dollars.
• Collect proof of foreign tax paid for the foreign tax credit.
• List every foreign account and its highest balance for FBAR, and check the Form 8938 thresholds.
• Check for large gifts or inheritances from abroad (Form 3520) and foreign mutual funds (Form 8621).
• Plan for California tax on foreign income with no state credit for foreign tax.
• If you live abroad or plan to give up the green card, review the residency, treaty and expatriation rules first.

Need help with the return? See our individual tax preparation.

FAQ

Do green card holders pay U.S. tax on worldwide income?

Yes. Green card holders are U.S. tax residents and are generally taxed on worldwide income, the same as U.S. citizens. Foreign income tax already paid on that income can usually be claimed as a foreign tax credit, up to the U.S. tax on the same income.

When does my U.S. tax residency start with a green card?

Generally on the first day in the calendar year that you are present in the United States as a lawful permanent resident. If you also meet the substantial presence test, residency starts on the earlier of the two dates.

Can we file a joint return in the year we got our green cards?

A dual-status taxpayer can't file jointly unless both spouses elect to be treated as U.S. residents for the whole year under IRC section 6013(h). With that election you file jointly and can use the standard deduction, but both spouses are taxed on worldwide income for the entire year, and that election can't be made again later.

Do I pay U.S. tax on income I earned abroad before getting my green card?

Generally not, if you file as dual-status and received that foreign income before your residency began. Foreign-source income received after residency starts can be taxable even if the work was done earlier. The income also becomes taxable if you and your spouse elect to be treated as residents for the whole year.

Do green card holders have to report foreign bank accounts?

Yes, if you meet the thresholds. FBAR is required when foreign financial accounts total more than $10,000 at any time during the year, and Form 8938 applies above higher thresholds, starting at $50,000 at year-end for a single filer living in the U.S.

Do I still owe U.S. taxes if I live abroad with a green card?

Generally yes. Moving abroad doesn't end tax residency while you still hold the green card and it hasn't been abandoned or taken away. The foreign earned income exclusion and the foreign tax credit can reduce the U.S. tax.

Is there a tax when I give up my green card?

Possibly. Long-term residents, meaning green card holders in at least 8 of the last 15 tax years, generally file Form 8854 when residency ends, even if no exit tax is due, and can owe exit tax if they are covered expatriates. Giving up a green card before becoming a long-term resident doesn't by itself trigger Form 8854.