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US Taxes
for

INTERNATIONAL STUDENTS

Table of ContentS:

Introduction

In this blog, we will explore everything an International Student must know about US taxes, including which forms to file, the tax due date, which income is taxed, living as an exempt individual in the US (Exempt from Substantial Presence Test), not taxes and a lot more. Go ahead and grab some coffee! 

This is going to be the Ultimate Tax Guide: US Taxes for International Students


Do International Students in the US pay taxes ?

Short Answer. Yes! Due to the F1 Visa of Students, they are considered as “exempt individuals” by the IRS for at least 5 years from the date they arrive in the US. The term “Exempt” here refers to exempt from the “Substantial Presence Test” or the SPT, not exempt from Taxes. So, until the time you are on F-1 Visa and file Form 8843, you will be considered as a non-resident in the US for tax purposes. Non-Residents in the US are only taxed on US source income. We have an entire article in-depth on how non-residents are taxed in the US.

The non-residents or international students are taxed on :

  1. US Employment Income/Tips/Commission
  2. US Dividends
  3. US Capital Gains/Crypto gains
  4. US Rental Income
  5. US Interest (Reporting only)
  6. US Scholarships/Awards/Lotteries

International students in the US who are considered non-residents due to their visa must file Form 1040NR to report any taxable income in the US for the Tax year. Since non-residents do not get any standard deductions (Indian students being the only exception), more often or not there will be a balance due unless there is sufficient withholding. Bottom-line, if you have taxable income as a student, you must file your tax return.

I'm an International Student in the US. I have no Income for the Current Year. Do I need to file taxes?

If you have no income for the current year, there is no need to file form 1040-NR. However, as a student on F-1 Visa, you must file Form 8843 each year. This form maintains your exempt status in the US, failing which your WorldWide Income is subject to Tax. As a condition of your F-1 Visa, you must File Form 8843 every year.

I’m an International Student on (OPT/CPT) with Employment Income. What Forms do I need to File?

International Students will file Form 1040-NR (NR = Non-Resident) with the IRS. Along with it, they must file Form 8843 (Exempt Individual).

Do I have any Tax Benefits as an International Student ?

Unfortunately, there are very few tax benefits international students can get in the US. Non-residents have to claim Itemized deductions on their tax returns. Any state taxes withheld by the employer will be deductible on Sch A as itemized deduction.

The United states has tax treaties with several countries. Few of these countries give tax benefits to their students in the US. For example, Indian students studying in the US, get a standard deduction of $12, XXX.

If you are a citizen of Pakistan, studying in the US, the first $5,000 of compensation paid to you in the calendar year may be exempt from tax. God forbid if you are completing your own Taxes, you might want to go through the Tax treaties, the United States has signed up with your home country. Consumer Tax Software cannot figure this out for you. Still in doubt? Hire a Professional!

I’m an International Student on an F-1 Visa. I have received Dividends and Capital Gains in the current Tax year. What Form do I need to fill and how much Tax will I pay?

You will file Form 1040-NR to report your Taxable Income for the Year. On Schedule OI (Other Information) (Page 4 -Years prior to 2020), you will report your US dividends and capital gains. Based on the treaty with your home country, you could be taxed on a lower rate treaty rate. If your home country doesn’t have a tax treaty, like the UAE, you will pay 30% tax. Similarly, for capital gains for students on F1, are taxed at flat 30% or lower rate reported on schedule OI. The treatment for capital gains for students on F1 Visa is different from the treatment from the Foreign National who is a Non-Resident (Not on F-1/J-1 VISA).

What Tax Forms do International Students file and What is the Due date for Filing ?

International students in the US have to file form 1040-NR. The NR stands for Non-Resident. Prior to 2020, there was also a Form called Form 1040NR-EZ. Going forward, this form has been discontinued and Form 1040-NR should be used, which has been redesigned to look a lot more like the regular form 1040.

Along with Form 1040-NR, students must attach Form 8843 – Statement for Exempt Individuals and Individuals with a Medical Condition. 

If there is no filing requirement, students must only complete form 8843 and mail form 8843 to the department of the treasury, Internal Revenue Service Center, Austin, TX 73301-0215 by the due date (including extensions).

The due date for these forms is usually the 15th day of the 4th month after the end of the Tax year, ie. April 15. Due to the pandemic, the US Tax Due date has been postponed for the last 2 years. The due date for the 2022 Tax Year is April 18, 2023. If you did not receive wages for employment in the US, which were subject to withholding, the due date is June 15, 2023, or simply the sixth month after the close of the tax year.

What Documents do I need to File my US Tax Return as an International Student ?

If you feel you had taxable income in the US and have a filing requirement, you need to have a Social Security Number  (SSN) or ITIN (Individual Tax Identification Number). If you had employment income, you should have Form W2. If you had passive income like interest/dividends/capital gains, you should request Form 1099 from your broker.

What about State and Local Taxes? (Do International Students in the US pay State Taxes as well?)

Depending on the state, you currently live in and have taxable income, you will also have to pay state taxes on that income. Some cities and localities have taxes as well. International Students on F-1 Visa by completing Form 8843 will qualify for the “Exempt” Status on their Federal tax return. When it comes to residency in the states, each state has its own rules which define who is a resident and who isn’t? If you do work in multiple states and localities, you may be able to take credit for the taxes you paid in the Non-resident states.

What if I do not have an SSN to file my Tax Return?

The US Social Security Number may not be issued to a Foreign national for many reasons. However, you can still apply for ITIN(Individual Tax Identification Number) with the IRS. The ITIN can be obtained by filing form W-7, along with your tax return, proof of identity, and foreign documents to the address given below. (The tax return with ITIN application will be paper-filed)

Mail it to :

Internal Revenue Service Austin Service Center

ITIN Operation

P.O. Box 149342

Austin, TX 78714-9342

Alternatively, you can also apply for an ITIN in-person using the services of an IRS-authorized Certified Acceptance Agent which will prevent you from having to mail your proof of identity and foreign status documents or you may make an appointment at a designated IRS Taxpayer Assistance Center (TAC) by calling 1-844-545-5640.

The following are the documents needed for the ITIN application.

• Passports ( an Absolute must!!)

• National Identity Card

• U.S. Driver’s License

• Civil Birth Certificate

• Foreign Driver’s License

• U.S. State Identification Card

• Foreign Voter’s Registration Card

• U.S. Military Identification Card

• Foreign Military Registration Card 

• United States Visa

• USCIS photo identification

Assuming you are taking the 1st route of mailing documents, a certified copy of your passport will be required( for the sake of safety never mail your original documents even though they may be returned to you immediately). Passport can be certified at the local embassy or your original passport office of issuance. The passport is the only document (standalone) you can submit without bothering with the other foreign documents. A US visa would also be readily available, hence must also be attached to prove your “Foreign Status”.

It usually takes 8-12 weeks to process your ITIN Application. Once approved you will receive a letter after 8-14 weeks or max of 15 weeks. If you do not receive notification within the timeframes above, you may call the IRS toll-free line at 1-800-829-1040 to check on the status of your application.

I have recently completed my OPT and now I have moved to H1 Visa working Full time in the US. What US Tax Return should I file now?

This has to be one of the most common questions for US Taxes for International Students. Unfortunately, the answer to this one is a little more complicated. In this scenario, the Taxpayer could be Non-Resident, Resident or a Dual-Status resident. We have a dedicated Article written for Dual-Status Alien here.

US-Taxes-for-international-Students
US Taxes for International Students with Infograph

Let us look at a few examples and scenarios here for US Taxes

Mr. Kumar, an International Student, who was on an F1 visa, got an offer from Company X and moved to H1 Visa on 1st October 2022. Mr. Kumar is a Non-Resident till 30th September since he was on an F1 visa. His count for the SPT test will start from 1st October 2022. He has 92 days in the US for the 2022 Tax Year. Since he doesn’t meet SPT, be will a Full Year Non-Resident.

With the same example as above, if he did change his visa on May 1st, 2022, he would be a dual-status alien from that date. If Mr. Kumar was married, he could be eligible for elections and file a full-Year tax return. 

So as you can see all 3 scenarios are possible when there is a visa change from a non-immigrant Visa to an Immigrant Visa. In these cases, Professional Advice is highly recommended. 

What if I filed Form 1040 mistakenly, instead of Form 1040-NR?

  If you have incorrectly filed Form 1040 instead of Form 1040NR, you can file an amended tax return by filing Form 1040X. You may have to amend your state tax returns as well.

Do International Students get Tuition Credits and Deductions?

International Students who receive Form 1098-T are not eligible for tuition credits like the American Opportunity Credits (AOC) or the Lifetime Learning credits. These are only eligible for US Citizens/Residents, not International Students.

Can International Students deduct Student Loan Interest Expenses?

Absolutely, interest expenses from international lenders can be deducted up to $2,500 as an above-the-line deduction on Form 1040NR. Once the taxpayer’s income crosses a certain threshold, the $2,500 deduction will start phasing out.

The loan must only be used for education purposes. US students (citizens) are usually issued Form 1098-E from their institutions. 

As an International Student, am I subject to Social Security and Medicare Taxes?

International Students are not subject to social security and medicare taxes in the US. If your employer has withheld these taxes by mistake, you should ask them to issue a corrected copy, known as W2C (Corrected). If your employer refuses to issue a corrected copy, then you may have to File Form 843 with the IRS and you should be able to get your tax refund.

Are International Students eligible for Stimulus Check Payment?

Nope, since international students are considered non-residents for tax purposes, they are not eligible under the cares act. If you did receive it in an error, you will have to return it back to the IRS.

Conclusion

US Taxes for International students are far from simple.  Your visa, tax treaty with your home country, filing status, limited credits, deductions, and finally income, play a big role in figuring out your taxes. 

The US Taxes for International students is a “niche affair” compared to the millions of resident tax Returns filed (Form 1040) filed each year. Consumer-level software isn’t the best place to get this done. Any treaty benefits and deductions missed will far outweigh the preparation cost associated with a Student tax return. 

If you have any questions on this blog or US Taxes in general, please feel free to write to us at SuperExpat@Cloudexpattax.com   

DISCLAIMER: The above info should only be considered for the knowledge of US Tax. Every Taxpayer’s situation is unique, strongly advise you to consult a tax professional.