Many international students on F-1, J-1, M-1 and Q engage in practical training and earn income through one of the USCIS (United States Citizenship and Immigration Services) approved programs or participate in on-campus and off-campus employment during or post-study.
But do international students need to pay tax?
It is sometimes thought that foreign students who receive any type of income and funds from their OPT or from on-campus or off-campus activity are not liable to US taxes, however this is untrue.
For many international students, the US tax system may seem complex and as a result they are not aware of their filing and taxation obligations.
According to US tax law and regulations (Publication 519), “nonresident aliens usually are subject to US income tax only on US source income”, respectively, foreign students under F1, M1, J1 and Q visas are liable to pay both federal and state income taxes on their US sourced income, which may include wages, tips, scholarship and fellowship grants, dividends, and so on. Find out more about taxable income here.
Nonresident aliens file form 1040NR (US Nonresident Alien Income Tax Return) to assess and file federal income taxes.
Most nonresident aliens do not qualify for the standard deduction.
Do international students need to file a tax return?
Yes, most international students on an F-1 visa are considered nonresident aliens in the US, and are required to file a US tax return (form 1040-NR) for income from US sources.
What income is taxable?
Scholarships and Fellowship Grants are also taxable income when paid to nonresident aliens. IRS Notice 87-31 exempts scholarships and fellowships from tax in the US when paid to US citizens and residents, yet the US scholarship and fellowship grants paid directly to a foreign student are generally taxable and subject to reporting.
Since 2018, the personal exemption was reduced to $0 (read more).
Check our complete guide to filing taxes as an F-1 student in the US.
Can international students deduct expenses?
The general rule is that you cannot deduct personal or living expenses unless specifically allowed by the US tax code.
Some foreign students are eligible for a direct write-off of that part of the scholarship or grant that was used to cover qualified educational expenses. The deduction applies to all nonresident aliens who are candidates for a degree or at least half-time students.
The qualified educational expenses also include all out-of-pocket expenses paid for tuition, academic fees, books, supplies and equipment required by a college or university.
Read more about the deductions and exemptions you can and can’t claim here.
Avail of a tax treaty
Another way for international students to decrease federal income tax is to claim a tax treaty benefit, which will allow them to fully or partially exempt their US-sourced income from federal and/or some state income taxes.
The US tax treaty network covers more than 65 countries and almost all treaties have specific provisions that apply to students, trainees and apprentices.
In conclusion, foreign students are liable to pay US income taxes on the income they earn in the US, including wages, tips, scholarship and fellowship grants, dividends, and must use nonresident tax return form 1040NR to calculate the amount of federal income tax they must pay.
Are international students due a tax refund?
If the amount of tax deducted from your payments during the tax year is more than the tax shown on your 1040NR, then you will be due a refund, otherwise you will be required to pay your US tax liabilities.
It is important to note that each individual state has its own tax system and tax regulations imposing different residency and filing requirements under which foreign students may have to file a state tax return and pay state income tax even when no federal return is due.
Sprintax can help you determine if you are due a tax refund. Simply create an account to get started with your US nonresident tax return.
How much tax refund will international student get
The average refund a Sprintax Returns customer receives is $1,004!
Sprintax will help you with the preparation of your tax documents and will make sure you claim the maximum legal tax refund.
Social Security and Medicare tax refund for international students
Most F-1 students are not required to pay FICA tax. You will only be obligated to pay this tax if you were in the US for more than 5 years.
If social security or Medicare taxes were withheld in error from pay that is not subject to these taxes, contact the employer who withheld the taxes for a refund. If you are unable to get a full refund of the amount from your employer, file a claim for refund.
You can apply for your FICA refund directly with the IRS. Alternatively, you can apply for your FICA tax refund with Sprintax!
Read more here.
How to prepare your tax return online
Sprintax Returns offers nonresident tax form preparation online through a simple step-by-step process.
Our nonresident tax return software analyzes personal, income and tax information and generates nonresident tax forms such as 1040NR, state tax returns, form 8843 and W-7 ITIN application where applicable.
Through the user-friendly, step-by-step application, the software collects data that considers your allowed expenses, tax treaty benefits, deductions and exemptions helping you to prepare a compliant tax return and reduce your income tax liability as much as is legally possible.
Sprintax offers 24-hour support to students via our Live Chat facility to answer any questions you may have.
You can also check our full guide to taxes for international students on F-1 visa.
