Lori Meadows
International students in the US on F, J, M, or Q visas are considered exempt individuals and are excused from the Substantial Presence Test for the first five years. However, they are still required to file tax returns with the Internal Revenue Service (IRS) each year they are in the country. While the IRS does not allow electronic filing (e-filing) for nonresident aliens, international students can still file their tax returns and may even be eligible for tax refunds.
| Characteristics | Values |
|---|---|
| Who should file tax returns? | International students and their dependents (including spouses and children of all ages) who were in the US during the previous calendar year. |
| Who is exempt from filing tax returns? | Nonresident alien students and scholars who have income only from: U.S. savings & loan institutions, U.S. credit unions, U.S. insurance companies, certain investments that generate portfolio interest, tax-free scholarships or fellowship grants, and/or any other income that is nontaxable under the Internal Revenue Code. |
| What forms are required? | Form 8843 (for non-employed international students), Form 1040-NR (federal tax return), Form 843, Form W-4, Form W-7 (for Individual Taxpayer Identification Number or Social Security Number), and state tax forms depending on the state. |
| How to file? | Tax returns cannot be electronically filed by nonresident aliens. Forms must be printed and mailed to the Internal Revenue Service (IRS) along with supporting documents. |
| When to file? | By April 15 of each year for the previous year's income. |
| Where to file? | Internal Revenue Service Center, Austin, TX 73301-0215, U.S.A. |
| Cost to file? | There is no cost to submit tax returns to the IRS, but there may be a cost for using a service or seeking the help of a certified public accountant (CPA). |
| Benefits of filing? | Compliance with the law, potential for a tax refund, protection of taxation of worldwide income, and fulfillment of visa obligations. |
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What You'll Learn
International students on F, J, M, or Q visas are considered exempt individuals
International students on F, J, M, or Q visas are considered "exempt individuals" by the Internal Revenue Service (IRS). This means that these students are excused from the Substantial Presence Test during their first five years in the US. The Substantial Presence Test is used to determine if an individual has been in the US long enough to be considered a resident for tax purposes. To be considered a resident, an individual must be physically present in the US for at least 183 days during a 3-year period, including the current year and the two preceding years.
As exempt individuals, international students on F, J, M, or Q visas are not required to pay Social Security Tax and Medicare Tax on wages earned from services performed within the US. This exemption applies to students in F-1, J-1, or M-1 status who are temporarily in the US for less than five calendar years. However, this exemption does not apply to spouses and children of these students, nor to employment not allowed or closely connected to the purpose of their visa.
While exempt individuals are excused from the Substantial Presence Test, they may still need to file tax returns and pay taxes on any income earned in the US. International students who have earned wages from US employment, received scholarships from American organisations, or made interest on money in American bank accounts, are considered to have made US source income and may need to file a tax return. Most F-1 students, for example, are considered nonresident aliens and are required to file a federal tax return (Form 1040-NR) to assess their federal income and taxes. Additionally, international students may need to file state tax returns and pay state income taxes, depending on the state they reside in.
It is important to note that the IRS does not allow electronic filing (e-filing) for nonresident aliens, so international students will need to mail their tax returns to the IRS. To file taxes, international students will first need to obtain an Individual Taxpayer Identification Number (ITIN) or a Social Security Number (SSN). They can apply for either of these numbers in conjunction with filing their tax return by filling out a W-7 form.
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Non-resident alien students and their tax requirements
International students on F, J, M, or Q visas are considered "exempt individuals" and are excused from the Substantial Presence Test for the first five years they are in the US. After this period, they will be subject to the test, which is used to determine whether they have been in the US long enough to be considered a resident. Most F-1 visa students are considered nonresident aliens in the US and are required to file a US tax return (Form 1040-NR) for income from US sources.
Nonresident aliens who are required to file an income tax return must use Form 1040-NR, US Nonresident Alien Income Tax Return. This form is used to assess federal income and taxes. A nonresident alien's income that is subject to US income tax must generally be divided into two categories: income that is effectively connected with a trade or business in the United States, and US-source income that is fixed, determinable, annual, or periodical (FDAP). Effectively Connected Income should be reported on page one of Form 1040-NR, while FDAP income should be reported on Schedule NEC (Form 1040-NR). FDAP income is taxed at a flat rate of 30% (or a lower treaty rate, if applicable), while Effectively Connected Income is taxed at graduated rates similar to those for US citizens and residents.
Nonresident alien students and scholars who have income only from specific sources, such as US savings and loan institutions, US credit unions, US insurance companies, certain investment income, or tax-free scholarships, may not be required to file a US tax return. However, any income that is not taxable due to an income tax treaty must still be reported on a US income tax return, even if no tax is due. It is important to note that nonresident aliens are not allowed to electronically file their tax returns and must mail their forms to the Internal Revenue Service Center in Austin, Texas.
To accurately determine tax residency status, individuals can refer to the IRS's "Introduction to Residency Under US Tax Law" and Publication 519, available on the IRS website. Additionally, tools like GLACIER Tax Prep can help determine residency status and provide guidance on completing federal tax forms.
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State and Local Taxes (SALT) deduction
The State and Local Tax (SALT) deduction is a federal tax break that allows taxpayers who itemize to deduct certain taxes paid to state and local governments from their taxable income. This deduction is a large tax expenditure, providing a special deduction that wouldn't be included in a standard tax code.
The SALT deduction was introduced by the Tax Cuts and Jobs Act (TCJA) in 2017, which capped the deduction at $10,000 per year, consisting of property taxes plus state income or sales taxes, but not both. This means that taxpayers who itemize must choose between deducting their income taxes or sales taxes. The limit for those married filing separately is $5,000. Before 2017, there was no cap on the SALT deduction, allowing taxpayers to deduct 100% of their state and local taxes paid.
The SALT deduction is beneficial for taxpayers in high-tax states and high-income filers as it avoids double taxation. It reduces federal taxpayer liability by excluding income already taken in taxes for state and local government services. States with high state and local tax rates that provide more government services typically see the greatest number of taxpayers claiming the SALT deduction. These often include high-income states such as New York, California, Connecticut, and New Jersey.
To take advantage of the SALT deduction, taxpayers must choose to itemize rather than take the standard deduction when filing their annual return. If the SALT deduction and other write-offs don't add up to more than the standard deduction amount, it may not be beneficial to itemize. Taxpayers can claim itemized deductions on Form Schedule A, which is used for making itemized tax deductions.
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Students with F-1 visas and their tax obligations
International students in the US on an F-1 visa are considered nonresident aliens for tax purposes. This means that they are taxed only on US-source income. International students on an F-1 visa are generally exempt from Social Security and Medicare taxes for up to five years from the date of their arrival in the US. However, they may be liable for these taxes if they have been in the US for more than five years or if they change to another immigration status that is not exempt.
F-1 students are typically not required to pay FICA (Federal Insurance Contributions Act) tax, but there are some exceptions. If you have been in the US for more than five years, you may be obligated to pay FICA tax. Additionally, if you have earned income from an OPT (Optional Practical Training) program, you will be required to pay tax on that income.
As a nonresident alien, F-1 students must file a US tax return (Form 1040-NR) to assess their federal income and taxes. This form must be printed off and mailed to the IRS, as electronic filing is not allowed for nonresident aliens. F-1 students may also need to file a state tax return and pay state income tax, depending on the state they are living in.
It's important to note that international students may be eligible for tax refunds, especially if their scholarship is partially or fully covered by a tax treaty. If you believe you have paid taxes in error, you can contact your employer for a refund or file a claim with the IRS using Form 843.
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Tax refunds for international students
International students in the US on F-1 visas are usually considered nonresident aliens for tax purposes and are therefore only taxed on US-source income. This includes income from a job, scholarship money from an American organisation, or interest on money in an American bank account.
If you are an international student and you earned income in the US during the previous calendar year, you are required to file a US tax return. This is done by filling out a form 1040-NR (federal tax return) and mailing it to the IRS, along with all required supporting documents. Even if you did not earn any money, you will still need to file Form 8843 with the IRS.
You may also be required to file a state tax return, depending on the state. Nine states don't have any tax-filing requirements, but in other states, you may have to file a state tax return and pay state income tax even when no federal return is due.
If you are an international student, you may be eligible for a tax refund. Many F-1 international students can claim tax refunds from the US, especially if their scholarship is covered by a tax treaty. Most F-1 students are not required to pay FICA tax, unless they have been in the US for more than five years. If you believe you have paid too much tax, you can apply for a FICA tax refund.
To file your tax return, you will first need to obtain an Individual Taxpayer Identification Number (ITIN) or Social Security Number (SSN). If you don’t have one, you’ll need to apply for one in conjunction with filing your tax return by filling out a W-7.
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Frequently asked questions
Yes, all international students are required to file a tax return with the Internal Revenue Service (IRS) each year they are in the United States. This includes federal and state tax returns for those who earned income, and a non-employed federal form for those who did not.
International students must download the relevant forms, complete them, and mail them to the IRS with all required supporting documents. The IRS does not allow electronic filing for nonresident aliens, so international students cannot e-file their tax returns.
Yes, international students may be able to claim tax refunds from the US. This could be due to tax treaties or a lack of serious income if they have earned income in the US. If more tax than owed has been withheld, a return can be filed to claim a refund for the excess amount.
