In brief
An Israeli becomes a US tax resident if they have received a green card, or if they have met the substantial presence test: at least 31 days in the current year and 183 weighted days over three years (all the days of the current year, one third of the days of the previous year and one sixth of the days of the year before that). A US tax resident is liable to federal tax on worldwide income, at rates of 10% to 37% in 2026, and sometimes also to state tax, and must report accounts and assets abroad. If Israel also treats them as resident, the tax treaty between the countries decides according to permanent home, centre of vital interests, habitual abode and nationality, but the USA reserves the right to tax its citizens and residents as if there were no treaty, subject to exceptions.
Key takeaways
- 1Two federal tests: the green card test, and the substantial presence test of 31 days in the current year and 183 weighted days over three years.
- 2The closer connection exception (Form 8840) applies only to someone who stayed fewer than 183 days in the year, kept a tax home in Israel all year, and did not take steps to obtain a green card.
- 3A US tax resident is taxed on worldwide income. In 2026 federal tax rates are 10% to 37%, and the standard deduction for a single filer is 16,100 dollars.
- 4In the Israel-US tax treaty, the tie-breaker for individuals is in Article 3(2), and Article 6(3) (the saving clause) allows the USA to tax its citizens and residents as if there were no treaty, with exceptions.
- 5Florida does not impose personal income tax. In New York, someone who maintains a permanent place of abode there for substantially all of the year and spends 184 days or more in the state is a state tax resident.
- 6FBAR reporting is required when the total balances in foreign accounts exceed 10,000 dollars in a year, and Form 8938 is required from a single US resident above 50,000 dollars at year end or 75,000 dollars at any time.
When does an Israeli moving to the USA become a US tax resident?
According to the US tax authority (IRS), a person who is not a US citizen is a US tax resident for a calendar year if they meet one of two tests: the green card test or the substantial presence test. Someone who meets neither is a nonresident alien, taxed mainly on US-source income. In the year of the move itself, you can be both a nonresident and a resident, i.e. a “dual-status year”.
| Test or exception | When it applies | Result | Practical note |
|---|---|---|---|
| Green card test | Someone who was a lawful permanent resident at any time during the year | US tax resident | Tax status continues until the green card is formally surrendered or revoked |
| Substantial presence test | 31 days in the current year and 183 weighted days over three years | US tax resident | Also applies to holders of temporary visas such as E-2, L-1 and H-1B |
| Closer connection exception | Fewer than 183 days in the year, a tax home in and closer connection to a foreign country | Nonresident despite meeting the test | Form 8840. Does not apply to someone who took steps to obtain a green card |
| Exempt individuals | Students (F, J), teachers and trainees (J) and others | The days are not counted | Form 8843 is usually required |
| First-year choice | 31 consecutive days and presence on 75% of the days to year end, and meeting the test the following year | Resident for part of the first year | An election, not an obligation. Sometimes worthwhile for a joint return or deductions |
| Treaty tie-breaker | Resident under the law of both countries | Resident of one country for treaty purposes | Form 8833 and a nonresident return. Implications for green card holders |
How is the substantial presence test calculated?
The test is met if you were in the USA for at least 31 days in the current year, and at least 183 days over a three-year period, using a weighted calculation:
- All the days you were in the USA in the current year.
- One third of the days you were in the USA in the previous year.
- One sixth of the days you were in the USA in the year before that.
- A day on which you were present in the USA, even for part of it, usually counts as a full day, with exceptions such as transit on a connecting flight.
The IRS example: someone who stayed 120 days in each of three consecutive years accumulates 120 + 40 + 20 = 180 days, and so does not meet the test. By contrast, an Israeli who arrives on an E-2 visa and stays in the USA most of the year will meet the test in the very first year, even without a green card.
What is the closer connection exception, and who can use it?
The closer connection exception allows you to be treated as a nonresident despite meeting the substantial presence test. It mainly suits someone who spends a significant part of the year in the USA but whose life remains in Israel. The cumulative conditions according to the IRS:
- A stay in the USA of fewer than 183 days in the current year.
- A tax home in a foreign country throughout the year.
- A closer connection to that country than to the USA: a permanent home, family, property, business, driving licence, voter registration and more.
- You have not taken steps to obtain a green card, and no such application was pending. Filing forms such as I-130, I-140 or I-485 rules out the exception.
- Filing Form 8840 by the due date of the return. A late filing will be accepted only if you show that you acted reasonably to learn of the requirement.
From what day does residency begin, and what is a dual-status year?
According to IRS Publication 519, under the substantial presence test residency usually begins on the first day you were present in the USA that year. Up to 10 days of early visits can be disregarded if you show a closer connection to and a tax home in a foreign country, together with a statement to the IRS. Under the green card test, residency begins on the first day of the year on which you were present in the USA as a permanent resident. In the year of the move you usually file a dual-status return: the part before residency begins is reported as a nonresident, and the part after it as a resident.
The date of first entry in the year, preparatory visits before the move and the date the green card is received determine from when the USA treats you as residents. It is worth planning them together with a tax adviser in both countries, before booking flights.
What does tax on worldwide income mean?
A US tax resident reports and pays federal tax on all their income, from any source in the world: salary, business, dividends, interest, rent from an apartment in Israel and capital gains. According to the IRS update for 2026, the seven federal tax rates remain 10% to 37%, and the standard deduction for a single filer is 16,100 dollars (32,200 dollars for a married couple filing jointly). State income tax may be added on top, depending on the state you live in. US citizens are taxed on worldwide income wherever they live, including Israelis with dual citizenship living in Israel. Someone who moves to the USA and later acquires citizenship remains subject to US reporting even if they return to Israel. This is a point worth taking into account already when planning the move.
What does the Israel-US tax treaty say when a person is resident in both countries?
Israel and the USA have a double tax treaty, whose tie-breaker for individuals is in Article 3(2). When a person is considered resident in both countries under domestic law, the treaty determines by an order of tests which country prevails for treaty purposes:
- Permanent home: the person will be considered resident of the state in which they have a permanent home.
- Centre of vital interests: if they have a permanent home in both or in neither, it is examined where their personal and economic relations are closer. Under the treaty, the centre of vital interests of an “oleh” (new immigrant) as defined in section 9(16) of the Israeli Income Tax Ordinance is deemed to be in Israel.
- Habitual abode: if the centre of interests cannot be determined, it is examined where they usually live.
- Nationality: if they have a habitual abode in both or in neither, they will be considered resident of the state of which they are a national.
- Mutual agreement: if they are a national of both or of neither, the competent authorities will decide by agreement.
Someone seeking to be treated as an Israeli resident under the treaty even though they are a US resident under US law usually files a nonresident return (1040-NR) together with Form 8833 disclosing the treaty position. It is important to remember that the treaty applies to federal taxes only, and US states are not necessarily bound by it. The treaty withholding rates on dividends, interest and royalties are set out in the guide Corporate tax and dividends to Israel, and an overall picture in the guide Israel's tax treaties.
According to the IRS, a green card holder who chose to be treated as resident of a foreign country under a treaty and did not waive the treaty benefits may be treated as having ended permanent residence for tax purposes. If they are a “long-term resident”, this may trigger the US exit tax rules (section 877A) and the Form 8854 requirement. A “covered expatriate”, for example with a net worth of 2 million dollars or more, is exposed to tax on unrealised gains. In addition, such a position may have immigration consequences. This should be checked in advance.
What is the saving clause in the treaty, and why does it matter to citizens and green card holders?
Article 6(3) of the treaty, the “saving clause”, provides that each state may tax its residents, as determined under Article 3, and its citizens, as if the treaty had not come into effect. In other words, a US citizen living in Israel usually cannot use the treaty to reduce their US tax, other than through the credit.
Article 6(4) lists exceptions in which treaty benefits are preserved for citizens and residents too, including Article 21 (social security payments), Article 26 (relief from double taxation), non-discrimination and the mutual agreement procedure. Under Article 21, social security payments and public pensions paid by one state to a resident of the other state are exempt from tax in both states. Under Article 20, a private pension is as a rule taxed only in the recipient's state of residence. The implications for a pension from Israel need to be checked according to the type of pension.
Which US state is best to live in for tax purposes, and what is the difference between Florida and New York?
Beyond federal tax, each state decides whether and how it taxes its residents. The choice of state of residence can significantly change the overall tax burden.
- Florida: according to the Florida Department of Revenue, the state does not impose personal income tax and there is no requirement to file a personal state return. Property taxes and sales tax still apply.
- New York: a state tax resident is someone whose domicile is in New York, or a “statutory resident”: someone who maintains a permanent place of abode in the state for substantially all of the year and spends 184 days or more there. Any part of a day counts. New York City imposes additional income tax on its residents.
- Domicile: domicile changes only when you prove by clear evidence that you have abandoned the previous one and established a new one. Registering to vote in another state is not enough on its own.
- A broader comparison: property taxes, landlord-tenant law and insurance by state are explained in the guide How to choose a state in the USA.
What happens with social security in Israel and the USA?
The income tax treaty does not deal with social security contributions, and according to professional sources there is no social security agreement (totalization agreement) between Israel and the USA like those the USA has with many other countries. So there may be situations of double liability for social security contributions, and your status with Israel's National Insurance Institute (Bituach Leumi) after the move needs to be checked. A US resident working there usually pays US social security taxes (FICA or self-employment tax).
Which reports on assets in Israel are required from a US tax resident?
From the moment you become US tax residents, the reporting obligations on accounts and assets outside the USA apply to you, even if there is no tax to pay. The penalties for failing to report can be heavy, so this is one of the important issues in the first year.
| Report | When required | Deadline | Main sanction |
|---|---|---|---|
| FBAR (FinCEN 114) | The total balances in all foreign accounts exceeded 10,000 dollars at any time in the year | 15 April, with an automatic extension to 15 October. Filed with FinCEN, not the IRS | Inflation-adjusted civil penalties, particularly high for wilful violations |
| Form 8938 (FATCA) | Single US resident: above 50,000 dollars at year end or 75,000 dollars at any time. Couple filing jointly: 100,000 or 150,000 dollars | With the annual return | Up to 10,000 dollars, and up to 50,000 dollars more after IRS notice |
| Form 8621 (PFIC) | Holding in a passive foreign investment company, under certain conditions | With the annual return | A punitive tax regime on distributions and sales |
| Form 8854 | Ending permanent residence or renouncing citizenship | With the return | A penalty of 10,000 dollars for failure to file |
Israeli mutual funds and ETFs may be considered passive foreign investment companies (PFIC) for US tax purposes, with punitive taxation and a reporting obligation on Form 8621. Holding an Israeli company, a study fund (keren hishtalmut) or a trust may also create additional reporting obligations. It is worth reviewing the holding structure with a US accountant before the move.
What should you do before immigrating (pre-immigration planning)?
- Mapping assets and gains: a gain accrued before the move may be taxed in the USA when realised after you become residents. It is worth examining, together with a tax adviser in both countries, whether to realise certain assets before residency begins.
- Funds and investments: reviewing the Israeli investment portfolio against the PFIC rules, and deciding what to keep and what to transfer.
- An Israeli company: anyone holding a company in Israel should check its status after the move, including the US rules on controlled foreign corporations and the concern that the company will be considered managed from outside Israel.
- Estate tax: someone who becomes a US resident for estate tax purposes is subject to tax on all their worldwide property, with an exemption of 15 million dollars in 2026, instead of an exemption of only 60,000 dollars for a nonresident. See US estate tax for non-residents.
- An income-producing property in Israel: rent from an apartment in Israel will be reported in the USA, and a credit for the Israeli tax will be examined under the rules and under Article 26 of the treaty.
- Documents and numbers: a US Social Security number, or an ITIN for someone not eligible for one. See ITIN, EIN and a bank account in the USA.
What happens in Israel when you move to live in the USA?
Moving to the USA does not automatically end Israeli residency. Under section 1 of the Income Tax Ordinance, residency is determined by the centre-of-life test, and there are presumptions based on days of stay: 183 days or more in the tax year, or at least 30 days in the year and 425 days cumulatively in that year and the two preceding years. The presumptions can be rebutted, and anyone doing so usually attaches a declaration of residency (Form 1348) to the return. If Israel and the USA both treat you as residents in the same year, the treaty tie-breaker will decide for treaty purposes.
- Exit tax: under section 100A of the Ordinance, someone who ceases to be an Israeli resident may be treated as having sold their assets on the day before cessation, with the option of deferring payment of the tax until actual realisation, subject to conditions.
- Israeli-source income: rent from a property in Israel, salary for work in Israel and certain gains remain taxable in Israel even after residency ends.
- National Insurance and health: your status with the National Insurance Institute and entitlement to state health insurance are examined separately from tax residency.
- A company you control: controlling shareholders of an Israeli or foreign company should check the reporting obligations and the company's place of management.
What does the first year look like, step by step?
- Before the move: mapping assets, funds and companies, deciding on realisations, and coordinating with tax advisers in Israel and the USA.
- Setting the arrival date: checking how early visits and the date of receiving the green card affect the start of residency.
- Choosing a state of residence: checking state income tax and state residency tests, for example Florida versus New York.
- Notice in Israel: checking your status with the Israel Tax Authority and the National Insurance Institute, and preparing for the Israeli return for the year of the move.
- Registration in the USA: a US Social Security number or ITIN, a bank account, and Form W-9 for banks instead of W-8BEN.
- Ongoing tracking: recording days spent in each country and keeping documents on home, family and work.
- After year end: a federal return (usually dual-status in the first year), a state return, FBAR, Form 8938 and other reports depending on the assets.
- In Israel: an annual return for the year of the move, including a declaration of residency where needed, and checking credits under the treaty.
The Israeli aspects are set out in the general guide on ending Israeli tax residency and moving abroad. It is advisable to coordinate the steps with an Israeli accountant in parallel with the US accountant. This guide presents general information and is not tax advice. Every case requires an individual review by an accountant and a lawyer in both countries.
More on relocating to the USA: Stay and residence routes in the USA · Ending Israeli tax residency · Moving abroad with an Israeli company or business · The legal checklist for families
Frequently asked questions
Does getting a green card make me a US tax resident?
Yes. According to the IRS, someone who was a lawful permanent resident at any time during the year meets the green card test and is considered a tax resident, taxed on worldwide income. The tax status continues until the green card is formally surrendered or revoked, even if you no longer live in the USA.
How many days can you stay in the USA without becoming a tax resident?
There is no single number. The test is 31 days in the current year and 183 weighted days over three years: all the days of the current year, one third of the days of the previous year and one sixth of the days of the year before that. Someone who stays 120 days each year accumulates 180 days and does not meet the test. Someone who meets it but stayed fewer than 183 days in the year may benefit from the closer connection exception.
I live in the USA on an E-2 visa. Am I a tax resident?
In most cases, yes. E-2 holders are not “exempt individuals”, so their days of stay count towards the substantial presence test. Someone who lives in the USA most of the year will meet the test in the very first year, and will be liable to tax on worldwide income.
Can you be a tax resident of both Israel and the USA?
Yes, under the domestic law of each country. In such a case, Article 3(2) of the tax treaty determines one country for treaty purposes, according to permanent home, centre of vital interests, habitual abode and nationality. The decision does not override the saving clause, which allows the USA to tax its citizens in any case, subject to exceptions.
Is Florida really exempt from income tax?
Florida does not impose personal income tax, so there is no state income tax return for individuals. Federal tax applies in full, and property taxes and sales tax exist. Someone moving from New York also needs to prove that they have ended their domicile there.
What is FBAR, and does it apply to my bank account in Israel?
FBAR is an annual report to FinCEN on financial accounts outside the USA. It is required from US tax residents and citizens when the total balances in all foreign accounts exceeded 10,000 dollars at any time during the year. A bank account, a securities account and sometimes savings products in Israel are usually included.
Is an Israeli mutual fund a problem for a US tax resident?
It may be. Foreign funds and ETFs may be considered PFICs, with punitive taxation on distributions and sales and a reporting obligation on Form 8621. It is worth reviewing the portfolio with a US accountant before the move.
Does moving to the USA automatically end my Israeli tax residency?
No. Israel examines the centre of life and the day-count presumptions under section 1 of the Income Tax Ordinance, and ending residency may trigger exit tax under section 100A. Israeli-source income, such as rent from an apartment in Israel, remains taxable in Israel.
Read next · 12 min readUS Corporate Tax 2026 and Transferring Profits to Israel: C-Corp vs LLC, State Tax, Dividends under the Treaty and Reporting in Israel21% federal corporate tax, state tax, branch profits tax, withholding on dividends under the Israel-US treaty (25% or 12.5%), Form 5472, BOI 2026, Israeli tax.Read the guideSources
- IRS: Substantial Presence Test
- IRS: Closer Connection Exception to the Substantial Presence Test
- IRS Publication 519, U.S. Tax Guide for Aliens
- Convention between the United States and Israel with respect to Taxes on Income (IRS treaty text)
- IRS: Comparison of Form 8938 and FBAR Requirements
- IRS: Expatriation Tax
- IRS: About Form 8621 (PFIC)
- IRS newsroom bulletin: tax inflation adjustments for tax year 2026 (IR-2025-103)
- New York State Department of Taxation and Finance: Nonresident FAQs
- Florida Department of Revenue: personal income tax FAQ
- Globes: Double tax trouble for US olim (social security)
