First Year Living in the United States: When Does the IRS Start Taxing Your Income from Brazil?

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Brazilian individuals relocating to the United States often hear two statements that appear contradictory:

“In the U.S., you must report your worldwide income.”

“The first year is different.”

Both statements can be true at the same time — and it is precisely this overlap that leads to many filing errors in a taxpayer’s first U.S. tax return.

The general rule: worldwide income

The U.S. tax system is explicit:

• U.S. citizens, and

• Foreign individuals treated as U.S. tax residents (resident aliens)

are required to report worldwide income, including income earned outside the United States.

The Internal Revenue Service (IRS) consistently affirms this principle in its official publications addressing foreign-source income.

👉 What changes in the first year is not the worldwide income rule itself, but when it begins to apply to a newly arrived taxpayer.

The first year is rarely “all or nothing”

Contrary to common assumptions, a taxpayer’s first year in the United States is not automatically treated as a full year of U.S. tax residency.

Depending on visa status, date of arrival, and—most importantly—the number of days of physical presence in the U.S., an individual may be classified as:

• A nonresident alien for the entire year

• A resident alien for the entire year

• A dual-status alien, meaning part of the year as a nonresident and part as a resident

👉 For Brazilian taxpayers, dual-status years are extremely common, particularly when relocation occurs mid-year.

The key question is not “Do I live in the U.S.?”

The more relevant question is:

On what date did the IRS begin treating me as a U.S. tax resident?

That date determines when foreign income—including income from Brazil—becomes reportable on a U.S. tax return.

How the IRS determines U.S. tax residency

For most Brazilians who do not hold a green card, U.S. tax residency is determined by the Substantial Presence Test (SPT).

The SPT counts days of physical presence as follows:

• All days in the current year

• One-third of the days in the prior year

• One-sixth of the days in the second preceding year

If the total equals or exceeds 183 days, and the individual is present for at least 31 days in the current year, the taxpayer is considered a U.S. tax resident for that year.

⚠️ This calculation is not a mere technicality. It determines when U.S. worldwide taxation begins.

The turning point: becoming a tax resident mid-year

This is where many Brazilian taxpayers become confused.

Consider an individual who:

• Arrives in the U.S. in August

• Begins working in September

• Continues to earn income or hold assets in Brazil

It is common to assume that, in that year, only U.S.-source income must be reported.

However, the IRS may treat the individual as a U.S. tax resident starting on a specific date within that same year. From that point forward, the tax treatment changes.

Dual-status tax years: how they operate

When residency begins mid-year, the year becomes a dual-status tax year:

• Before the residency start date: treated as a nonresident alien

• After the residency start date: treated as a resident alien

📌 As a result, Brazilian income becomes reportable only for the portion of the year during which the taxpayer is considered a U.S. tax resident, unless a specific election is made.

The First-Year Choice election

U.S. tax law acknowledges that the first year of residency can be atypical and allows certain elections. The most well-known is the First-Year Choice, outlined in IRS Publication 519.

In general terms, this election allows a taxpayer to:

• Be treated as a U.S. tax resident starting on a chosen date

• Even if the Substantial Presence Test is not met for the entire year

Key requirements include:

• A continuous 31-day period of presence in the U.S.

• Remaining in the U.S. for the majority of days thereafter

👉 When this election is made, U.S. tax residency begins on the first day of the qualifying 31-day period.

⚠️ Even with the First-Year Choice, the tax year remains dual-status, as the individual was still a nonresident for part of the year.

Dual-status is not just a label—it affects your tax outcome

Many taxpayers underestimate the consequences of dual-status classification, but its impact is substantial.

No standard deduction

The IRS is explicit: dual-status taxpayers are not eligible for the standard deduction, even if they are fully employed and treated as residents during the latter part of the year.

Additionally:

• Certain deductions and tax credits may be limited or unavailable

• The overall tax treatment is generally less favorable than that of a full-year resident

👉 This explains why two Brazilian taxpayers who arrived in the same year may face very different tax results, even with similar income levels.

Election to be treated as a full-year resident

In limited circumstances—most commonly when the taxpayer is married—it may be possible to elect to be treated as a U.S. tax resident for the entire year, beginning January 1.

This often applies when:

• A spouse is a U.S. citizen, or

• A spouse is already a U.S. tax resident

Consequences of this election

Advantages

• Eliminates dual-status treatment

• Allows use of the standard deduction

Disadvantages

• Extends U.S. taxation to the entire calendar year

• May require reporting foreign income earned before relocating to the U.S.

📌 For this reason, the IRS emphasizes that this election is optional and should be evaluated carefully.

The most common first-year mistake

The most frequent error made by Brazilian newcomers is not misunderstanding a single rule, but rather assuming that the first year:

• Operates automatically

• Involves no strategic choices

• Carries no long-term consequences

In reality, the first year is when:

• Arrival dates matter

• Days of presence are critical

• Tax status can change mid-year

• Elections made—or not made—shape the entire return

⚠️ Misreporting a dual-status year as a full resident year often leads to inconsistencies that surface years later, when the IRS matches data across filings.

Conclusion

Before asking:

“Do I need to report my income from Brazil?”

a Brazilian taxpayer moving to the United States should first answer a more fundamental question:

On what date did the IRS begin treating me as a U.S. tax resident, and did I make—or could I have made—a different election in my first year?

Understanding this distinction is essential to:

• Correctly reporting the first U.S. tax return

• Avoiding common compliance errors

• Setting realistic expectations about how the U.S. tax system operates

Why work with Ace Advisors?

No two cases are the same—and in a first-year tax situation, details matter.

👉 Ace Advisors provides strategic, IRS-compliant guidance to help Brazilian individuals navigate their first U.S. tax year with clarity, accuracy, and confidence.