Ibrahim Gardner
International students are considered non-immigrant visitors who enter the United States temporarily to take classes or online courses. Most international students have F-1 student visas, which are non-immigrant visas. This means that international students are legally residing in the US, but they are not considered residents. However, for tax purposes, international students may be considered resident aliens after staying in the US for five years.
| Characteristics | Values |
|---|---|
| Definition of an international student | Non-immigrant visitors who come to the United States temporarily to take classes or take online courses virtually from anywhere in the world. |
| Criteria for being a non-immigrant | Intends to stay in the US temporarily, does not have US citizenship or legal permanent resident status (no valid "green card"), currently in the US on a non-immigrant visa status (without a valid green card), applies for a visa to be allowed entry into the US. |
| Types of student visas | F and M visas. F-1 or M-1 visa category. Other visa statuses include H4 and L2. |
| Criteria for F-1 or M-1 visa | Must be enrolled in an academic, language-training, or vocational program; school must be approved by the Student and Exchange Visitors Program; must be enrolled as a full-time student; must be proficient in English or be enrolled in courses leading to English proficiency; must have sufficient funds for self-support during the proposed course of study; must maintain a residence abroad with no intention of giving it up. |
| International students' resident status | International students are considered non-resident aliens for tax purposes during their first five years in the US. They are legally residing in the US with a valid visa but are not considered residents. |
| Resident alien status criteria | After staying in the US for five years, international students may be considered resident aliens for tax purposes, which can result in lower federal taxes but subject them to other taxes such as social security and FICA. |
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What You'll Learn
F-1 visa holders are considered 'non-resident aliens'
International students on F-1 visas are considered non-resident aliens in the United States for their first five calendar years. This classification is specifically for tax purposes, and F-1 visa holders are considered resident aliens after staying in the US for five years. This distinction is important for tax filing, as non-resident aliens have lower federal tax rates but may be subject to other taxes such as social security and FICA.
It is important to note that while F-1 visa holders are legally residing in the US with a valid visa, they are not considered permanent residents. The term "US Resident" for F-1 students is typically used only for tax purposes and after a certain period, such as five years. In official terms, F-1 visa holders are classified as non-resident aliens on student visas with a non-immigrant status.
The classification of "resident alien" is relevant for tax purposes and is determined by the "substantial presence" test outlined in the IRS Publication 519, U.S. Tax Guide for Aliens. This test considers the number of days an individual is physically present in the US over a three-year period, including the current year and the two preceding years. F-1 visa holders are exempt from this day count during their first five calendar years, solidifying their non-resident alien status during this period.
While F-1 visa holders may be considered non-resident aliens for tax purposes, their eligibility for certain competitions, scholarships, or other opportunities may vary depending on the specific requirements and interpretations of the term "legal US resident." Some sources suggest that having a US mailing address and tax ID may be sufficient to qualify as a legal resident in certain contexts, even without permanent resident status.
In summary, F-1 visa holders are considered non-resident aliens for their first five years in the US, primarily for tax purposes. After this period, they may be classified as resident aliens, subject to specific tax regulations. The unique circumstances of each F-1 visa holder, including their state of study and other factors, can also influence their residency status interpretation.
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'Resident alien' status after five years
International students on F-1 visas in the US are considered "non-resident aliens" for tax purposes during their first five years in the country. After staying in the US for five years, F-1 students will get "resident alien" status for tax purposes. However, this does not change their F-1 non-immigrant status, and they are still considered non-residents in an official capacity.
Resident Alien Status After Five Years
Those who hold F-1 visas and have been in the US for five years will be classified as "resident aliens" for tax purposes. This means they are subject to the same tax laws as US citizens and must report their worldwide income from all sources, including income from both within and outside the US. They are required to file a Form 1040, U.S. Individual Income Tax Return, or Form 1040-SR, U.S. Tax Return for Seniors. The deadline for filing is April 15, and the return should be submitted to the service center for the individual's area.
It is important to note that "resident alien" status for tax purposes does not grant any other rights or benefits typically associated with residency. F-1 students are still considered non-immigrants and are subject to the restrictions and limitations of their visa status. Their residency is purely for tax filing purposes and does not change their immigration status or grant them permanent residency.
Additionally, there are exceptions to the five-year rule for F-1 students. For example, if an F-1 student meets the "substantial presence" test, they may be treated as a non-resident alien even after five years in the US. This can occur if they are present in the country for fewer than 183 days during the current calendar year, maintain a tax home in a foreign country, have a closer connection to that country, and file the appropriate forms.
In summary, while F-1 students may acquire "resident alien" status for tax purposes after five years in the US, this does not grant them official residency or change their immigration status. Their residency is solely for tax filing purposes, and they must continue to comply with the requirements of their F-1 non-immigrant visa.
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'Non-immigrant' status
International students in the US are generally considered to be non-immigrants, with a non-immigrant visa status. This means that they are in the US temporarily for the purpose of study. There are two types of non-immigrant visas for students: the F and M visas. F-1 and M-1 visas are issued to those enrolled in an "academic" educational program, a language-training program, or a vocational program, provided that the school is approved by the Student and Exchange Visitors Program, Immigration and Customs Enforcement.
The Form I-20, "Certificate of Eligibility for Nonimmigrant Student Status," is an important document for non-immigrant students. It serves as proof of legal enrolment in a program of study in the US and is required for various benefits, such as applying for a driver's license or a social security number. The form is issued by a designated school official (DSO) upon acceptance into a Student and Exchange Visitor Program (SEVP)-certified school. It is crucial to keep the Form I-20 safe and easily accessible, as it is needed throughout the F and M student life cycle.
While international students on F-1 visas are considered non-immigrants, their status for tax purposes is that of "non-resident alien" or "resident alien," depending on the length of their stay. If an F-1 student has been in the US for a certain period, typically five years, they may be classified as a "resident alien" for tax purposes, resulting in lower federal taxes but subject to other taxes such as social security and FICA.
It is important to note that non-immigrant status restricts individuals to the activity or reason for which they were allowed entry into the US. Most non-immigrant visas are granted to those who can demonstrate their intention to return to their home country.
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'Substantial presence' test
International students on F-1 visas are classified as "non-resident aliens" for tax purposes. However, they are considered legal US residents in other contexts, such as participating in competitions or applying for scholarships.
Now, to address your main query about the Substantial Presence Test:
The Substantial Presence Test is a calculation that determines the resident or nonresident status of a foreign national for tax purposes in the United States. It is applied on a yearly basis and is composed of two parts: the 31-day test and the 183-day test.
To meet the substantial presence test for a calendar year (January 1 to December 31), an individual must be physically present in the United States for at least:
- 31 days during the current calendar year
- 183 days in total during the 3-year period that includes the current year and the two years immediately before that.
The calculation for the 183 days is as follows:
- Count all the days you were present in the current year
- Count 1/3 of the days you were present in the first year before the current year
- Count 1/6 of the days you were present in the second year before the current year
For example, if you were physically present in the US for 120 days in each of the years 2021, 2022, and 2023, the calculation would be as follows:
- 120 days in 2023 (current year)
- 40 days in 2022 (1/3 of 120)
- 20 days in 2021 (1/6 of 120)
The total for the 3-year period is 180 days, so you would not be considered a resident under the substantial presence test for 2023.
Exempt Individuals
It is important to note that certain individuals are exempt from counting days toward the substantial presence test, including those present in the US under an F, J, M, or Q student visa. These individuals are considered "Exempt Individuals" during the first five calendar years of their presence in the US and do not count days of actual presence for the purposes of the test.
Closer Connection Exception
There is also a Closer Connection Exception available only to students, which is worth looking into if you are an international student.
In summary, the Substantial Presence Test determines an individual's residency status for tax purposes in the United States, and while international students on F-1 visas are typically considered non-resident aliens, there may be exceptions depending on individual circumstances.
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International students and tax purposes
International students on F-1 visas in the US are considered "non-resident aliens" for tax purposes when they first arrive. After staying in the US for five years, they get "resident alien" status for tax purposes. International students are subject to federal taxes and may be subject to other taxes, such as social security and FICA, depending on their income. They are generally exempt from social security and Medicare taxes.
International students must fill in a W-4 tax form with their employer when they start work. They are required to file a US tax return (Form 1040-NR) for income from US sources. Even if they did not earn any income, they are still required to file Form 8843 with the IRS before the deadline. The form is required by the US government for certain non-resident aliens in the US on F-1, J-1, F-2, or J-2 visas for purposes of the substantial presence test.
International students who are considered "non-resident aliens" for tax purposes may benefit from tax treaties that the US has with 65 countries. These treaties can often reduce or eliminate US taxes on various types of income, such as pensions, interest, dividends, royalties, and capital gains.
In Canada, international students are considered residents for income tax purposes if they establish significant residential ties with the country. They are considered non-residents if they do not establish significant residential ties and stay in Canada for less than 183 days during the year.
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Frequently asked questions
International students on F-1 visas are considered "non-resident aliens" for tax purposes when they arrive in the US. They are considered "resident aliens" after staying in the US for five years.
International students are defined as "non-immigrant visitors" who come to the US temporarily to take classes. They are not considered US residents in general.
An F-1 visa is for academic students enrolled in academic programs, language-training programs, or vocational programs. An M-1 visa is for vocational students enrolled in non-academic programs other than language training.
Yes, resident aliens benefit from lower federal taxes. However, they are also subject to other taxes such as social security and FICA.
Yes, there are exceptions for J-1 professors or researchers who are complying with the requirements of their visas. They do not count days towards the substantial presence test for the first two calendar years.
