Top 5 U.S. Tax Tips for Green Card Holders and Resident Aliens

When living in the United States as a green card holder or resident alien, many opportunities and responsibilities come along with that existence. One of them is an understanding of one’s U.S. tax obligations. Unlike several nations that only tax income within their borders, the United States has a citizenship tax system. So if you are a green card holder, you are considered an American tax resident and must report and pay tax on the worldly income, regardless of where it was earned.

In this guide, we will discuss the five best tax tips every green card holder and resident alien should know and shed some light on taxes for green card holders, such as foreign income reporting, FATCA compliance, green card holder tax filing requirements, and more. Let’s get started.

1. Understand Your Tax Status: Resident Alien vs. Non-resident Alien

Before you even start thinking about filing requirements or deductions, it is extremely vital to identify your correct tax residency status.

The IRS classifies individuals as:

• S. citizens
• Resident aliens
• Non-resident aliens

If you’re a green card holder, you’re treated as a resident alien for tax purposes both within and outside of the United States. That carries with it the same tax obligations of an American citizen. This requires the submission of a federal tax return (Form 1040) to report all income earned anywhere in the globe and adhere to global financial reporting requirements such as FATCA.

Non-resident aliens, however, are taxed on U.S.-sourced income only and have another form (Form 1040-NR). Knowledge of this difference is useful because of the large difference in filing requirements, deductions, and tax rates between an alien resident and a non-resident alien.

2. Know Your Green Card Holder Tax Filing Requirements

Once you’re classified as a resident alien, your tax obligations begin. Let’s break down the green card holder tax filing requirements:

You Must File Form 1040

All green card holders must file Form 1040 annually if their income exceeds the IRS minimum filing threshold. This includes wages, self-employment income, investment income, foreign rental income, and more.

Filing Deadlines

• April 15 is the standard deadline.
• June 15 if you’re living abroad (automatic two-month extension).
• October 15 if you request an extension (Form 4868).

What You Must Report

• S. wages and salaries
• Capital gains
• Interest and dividends from both U.S. and foreign sources
• Rental or business income, even if it’s earned outside the U.S.
• Foreign bank accounts and assets, where applicable

Failure to file or report accurately can lead to fines, interest, or in extreme cases, immigration-related consequences.

3. Report All Worldwide Income and Foreign Accounts

Being a green card holder, you are taxed on global income. That is correct, regardless of whether you took money in your home country—rental income, dividends, a pension—you report it on your U.S. tax return.

This is where foreign income reporting becomes critical. Many green card holders mistakenly assume they don’t have to report foreign income if it’s already taxed abroad. Unfortunately, the IRS requires that all income be disclosed.

Key Reporting Forms:

• Schedule B (Part III) – Report foreign accounts
• FBAR (FinCEN Form 114) – If at any time during the calendar year the aggregate foreign financial account balances exceed $10,000
• Form 8938 – Required to be filed if foreign financial assets subject to coverage exceed certain thresholds

Example:

Assume you have €15,000 in a European bank account and also own foreign stock worth $40,000. You may be required to file both the FBAR and Form 8938.

Penalties for failure to comply:

• Failure-to-file FBAR penalty: non-willful, up to $10,000; willful, up to $100,000 or 50% of account balance
• Failure-to-file FATCA/Form 8938 penalty: at least $10,000, increasing to larger amounts for repeated failures

4. Make use of the Foreign Tax Credit

It really seems as if you got punished twice for the same income once in two separate countries—but blame IRS for being kind in form of the Foreign Tax Credit.

If you have borne tax in a foreign country on income which is also subject to tax in the U.S., you can claim credit on a dollar-for-dollar basis against your U.S. tax liability on Form 1116.

Illustration:

Assume that you’ve paid £5,000 worth of U.K. tax on income that is simultaneously taxable in the United States. You can claim the Foreign Tax Credit against your U.S. income tax on that income.

5. Consider the Foreign Earned Income Exclusion (FEIE)

The Foreign Tax Credit is especially useful for those holding green cards abroad or having investments in foreign countries to avoid double taxation.

Yet another way to reduce one’s tax bill in the U.S. is that provided by the Foreign Earned Income Exclusion. Working and resident foreign green card holders can exclude an amount of as much as $120,000 of their foreign earned income from U.S. taxation for 2025.

You must meet:

• The Physical Presence Test (330 days abroad during a 12-month period), or
• Bona Fide Residence Test (resident of a foreign country for a full tax year)

Form 2555 is used in order to qualify for this exclusion.

Important:

You must still report your foreign income even if you plan to exclude it. Reporting and exclusion are separate processes.

Bonus Tips for Smooth Filing

Work with a Tax Professional

U.S. tax laws for green card holders are complex, especially when foreign income and assets are involved. A qualified tax adviser can help you:

• File accurately and on time
• Avoid costly penalties
• Maximize credits and exclusions
• Maintain IRS and FATCA compliance

Keep Detailed Records

Maintain all foreign and domestic tax returns, bank statements, and documentation of residence or work abroad at least 6 years, especially if you are under FBAR or FATCA reporting requirements.

Don’t Rely on Software Alone

Most tax programs do standard returns. If you have foreign assets, investments, or income, you may need higher versions (e.g., Form 8938, Form 1116, or Form 2555) which standard software does not handle well.

Last Thoughts: Be Compliant, Be Informed

Dealing with taxes as a green card holder is complicated, but it is well worth it in order to protect your money and your immigration status. By learning your green card holder tax filing requirement, meeting foreign income reporting needs, and taking advantage of devices like the foreign tax credit and foreign earned income exclusion, you can reduce your risk and even save on your tax bill.

Ready to File with Confidence

KB Tax Devisers is expert at helping green card holders, resident aliens, and expats navigate the U.S. tax system. Contact us today for a consultation, and let us help you stay in compliance and financially prepared.