International Students: State Residents Or Not?

International students in the US on an F-1 visa are generally considered non-resident aliens for tax purposes for the first five calendar years of their stay. However, they may be considered resident aliens for tax purposes if they meet the Substantial Presence Test and are liable for Social Security and Medicare taxes. In addition, international students may be eligible for reduced tax rates or exemptions under tax treaties that the US has with 65 countries. While the term resident alien is used for tax purposes, it does not mean that the student is a resident in the traditional sense. State residency for tuition purposes typically requires US citizenship or permanent residency, and each state has its own requirements for establishing residency, which may include a minimum period of residency and demonstrating a continuous physical presence in the state.

International students with F-1 visas are considered non-resident aliens for tax purposes

International students with F-1 visas are typically considered non-resident aliens for tax purposes in the United States. This classification has significant implications for their tax liabilities and obligations.

Non-resident aliens for tax purposes are not taxed on their worldwide income like US residents but are generally only taxed on income earned in the US. The amount of tax they pay depends on their earnings, the tax rates in each state, and their eligibility for tax treaty benefits. The US has income tax treaties with 65 countries, which can reduce or eliminate US taxes on various types of income, such as pensions, interest, dividends, royalties, and capital gains.

To be considered a resident alien for tax purposes, an individual must meet either the "green card" test or the "substantial presence" test outlined in IRS Publication 519, U.S. Tax Guide for Aliens. F-1 visa holders are generally exempt from the substantial presence test for their first five calendar years in the US. This means that even if they are physically present in the US for more than 183 days during the relevant three-year period, they are still considered non-resident aliens for tax purposes during this initial period.

It is important to note that while F-1 visa holders are typically considered non-resident aliens, there may be exceptions. For example, if an F-1 student violates their non-immigrant status and engages in self-employment, their self-employment income will be subject to US income tax, and they may also become subject to self-employment tax. Additionally, F-1 students on CPT (Curricular Practical Training) are not exempt from federal taxes.

In terms of tax obligations, non-resident alien students must file a US tax return (Form 1040-NR) for any income earned from US sources. Even if they did not earn any income, they are still required to file Form 8843 with the IRS by the deadline, which is a statement for certain non-resident aliens present in the US on specific types of visas.

International students can benefit from tax treaties with their home country

International students in the US on an F-1 visa are generally considered nonresident aliens for tax purposes for the first five calendar years of their stay. However, if they have been in the US for more than five calendar years, they become resident aliens for tax purposes if they meet the "Substantial Presence Test". As nonresident aliens, international students are only taxed on US-sourced income.

The US has income tax treaties with 65 countries. Under these treaties, residents of foreign countries may be eligible for reduced tax rates or exemptions from US income taxes on certain types of income. These include pensions, interest, dividends, royalties, and capital gains. The specific items of income and the reduced rates and exemptions vary among countries. For example, F-1 students can be taxed at a flat rate of 30% on their capital gains during any tax year in which they are present in the US for 183 days or more, unless a tax treaty provides for a lesser rate of taxation. In certain cases, F-1 students may be able to claim a tax treaty that can reduce or fully exempt their income from taxes, in which case they are eligible for a refund.

International students can also benefit from specific tax treaty provisions. For instance, a special rule applies to students eligible for the benefits of Article 21(2) of the United States-India Income Tax Treaty, who can claim the standard deduction provided they do not claim itemized deductions.

It is important to note that income that is not taxable because of an income tax treaty must still be reported on a US income tax return, even though no income tax is due.

State residency requirements for tuition purposes

To qualify for in-state tuition, students must demonstrate an intent to stay in the state indefinitely and prove their residency with documents. This can be done by providing a driver's license, voter registration card, lease agreement, bank statements, pay stubs, property records, utility bills, or employment history. The specific requirements may vary depending on the state and the college. In some cases, the college may require a preponderance of evidence that the student or their family established state residency and that this residency was not merely incidental to their college attendance.

For dependent students, the state residency is based on the residency of their parents or legal guardians. If the student can be claimed as a dependent on someone else's tax return, they are considered a dependent student for state residency purposes. In most states, a dependent student must have at least one parent who is a state resident for at least a year before the student's college matriculation. In certain states, such as Tennessee, dependent students can qualify for in-state tuition as long as one of their parents lives in the state, regardless of custody.

Additionally, some states offer special provisions for specific groups. For example, California provides in-state tuition to the spouse and dependent children of full-time employees of state agencies. Florida offers in-state tuition to full-time employees of state agencies and political subdivisions for job-related law enforcement and corrections training. North Dakota allows former state residents who were domiciled in the state for three consecutive years within six years of enrollment to qualify for in-state tuition.

Regarding international students, those with F-1 visas are typically considered nonresident aliens for tax purposes during their first five calendar years in the US. After this period, they may become resident aliens for tax purposes if they meet the "Substantial Presence Test". However, this does not automatically grant them resident status; it only pertains to their tax filing status.

Continuous physical presence in the state is required for state residency

Continuous physical presence in the state is a fundamental requirement for those seeking naturalization and citizenship in the United States. This requirement is a vital benchmark in determining an applicant's commitment to establishing roots and integrating into American society. It is a key component of the naturalization process, serving a distinct purpose in evaluating eligibility.

USCIS defines "continuous residence" as an applicant maintaining residence within the United States for the required period, which is generally five years. This period can be shorter for certain applicants, such as those who are qualified spouses of US citizens, who must reside continuously in the US for three years before filing the N-400.

The physical presence requirement is set at half of the continuous residence period, which is typically 30 months. For those filing based on marriage to a US citizen, this requirement is reduced to 18 months. This requirement is cumulative, meaning that each day spent outside the United States counts towards this total. Extended absences can disrupt an applicant's continuous residence, with absences of more than six months potentially breaking the continuity of residence. Absences of one year or more will definitely disrupt an applicant's continuous residence and may trigger a presumption of abandonment.

To overcome these challenges, applicants must provide compelling evidence of their intent to maintain lawful permanent resident status. This can include documentation such as tax records, employment history, and family ties. Exceptions to the continuous residence and physical presence requirements exist to accommodate specific circumstances, such as employment for the US government, military service, or medical conditions.

International students can work in the US after graduation with the OPT program

International students on an F-1 visa can work in the US after graduation through the Optional Practical Training (OPT) program. OPT is a form of temporary employment directly related to an F-1 student's major area of study. Eligible students can apply to receive up to 12 months of OPT employment authorization before completing their academic studies (pre-completion) and/or after completing their studies (post-completion).

To be eligible for OPT, students must be enrolled full-time for one academic year at a college or university certified by the US Immigration and Customs Enforcement (ICE) Student and Exchange Visitor Program (SEVP) to enroll F-1 students. Students can work up to 20 hours per week during the academic year and full-time when school is not in session during pre-completion OPT. For post-completion OPT, students must work part-time (at least 20 hours per week) or full-time.

International students can also apply for a 24-month extension of their post-completion OPT employment authorization if they have earned a degree in certain Science, Technology, Engineering, and Mathematics (STEM) fields. To be eligible for the STEM OPT extension, students must be employed by an employer enrolled in the E-Verify program and have received an initial grant of post-completion OPT employment authorization based on their STEM degree.

It is important to note that OPT is not a path to permanent residency in the US. The F-1 student visa does not allow for "dual intent," meaning students cannot come to the US on an F-1 visa with the intention of staying permanently. If students wish to transition to a permanent status, they will need to explore other options, such as an H-1B visa or a Green Card.

Frequently asked questions