I’ve always found income tax filing stressful, even though I’ve been doing it for decades, and with professional help. One of the things on my worry list after my son moved to the US, then, is naturally about his tax filing.
The move to a new country as an international grad student is challenging as it is, and during the pandemic, even more so, what with most offices not operating to full capacity. The campus itself only just opened this Fall. By the time he settles down into a comfortable routine, he’ll have to start thinking about navigating tax returns.
You know what they say–knowledge is power. And who better to receive it from than the experts?
Veronica Rhodes from TFX has graciously agreed to shed some light on this with tax tips for international grad students in the US.
TFX is a women-owned tax firm that offers all U.S. tax services — for both American citizens and non-citizens with U.S. tax filing requirements. From straightforward tax preparation to complex cases involving multiple factors — they’ve handled it all for over 25 years.
6 Tax Tips for International Grad Students
It is no surprise that the United States has historically been a top destination for international grad students. In the latest edition of the QS World University Rankings, 26 of the top 100 universities in the world are located in the U.S., with five in the top 10. So many people go to the U.S. to study that it’s estimated that there are 1 million international students in the country at any given time.
If you are an international grad student in the United States, taxes probably aren’t high on your to-do list. However, you are expected to meet all your obligations, including filing an annual tax return. How you handle your tax affairs will affect future residency and visa applications.
Here’s a quick guide to taxes for international grad students. The information in this article should apply to both J-1 and F-1 visa holders.
Do international students need to file a tax return?
Yes, but you are subject to different tax rules and requirements. F-1 and J-1 international students are considered nonresident aliens for tax purposes. This means that you are only taxed on U.S.-sourced income.
You are still required to file a tax return even if you don’t earn income during your stay in the U.S.
The filing deadline (April 15) is the same for residents and nonresidents.
What income is taxable?
While citizens, permanent residents, and resident aliens are taxed on their worldwide income, you only need to pay tax on U.S.-sourced income. Your tax bill depends on many factors, including where you live and work and how you use your income.
As a general rule, the following types of income are taxable:
- Employment income (salaries, wages, fees, and gratuities)
- Interest and dividends
- Awards and prizes
- Scholarships, fellowships, and grants
Stipends and scholarship or fellowship grants are nontaxable if the money is used for education expenses (e.g. tuition and fees, books, supplies, equipment). The cost of room and board, research, travel, and clerical help do not qualify for this exemption.
What is state income tax?
It’s important to note that federal income tax is different from state income tax. Federal taxes apply to everyone within the United States, while state taxes only apply to people within that particular state.
Since state tax rates and deductions vary, your tax liability will depend on where you are based. This may lead to a situation where you are required to file a state tax return and file state taxes even if you are not required to file a federal return.
9 U.S. states—Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming—levy no state income tax.
What forms do I use to file my taxes?
Use Form 1040-NR (U.S. Nonresident Alien Income Tax Return) to report U.S.-sourced income earned while living in the United States. This form can look complicated, so don’t rush the process.
Important: Do not confuse this form with Form 1040-NR-EZ, which has been discontinued beginning tax year 2020.
If you didn’t earn any money during your stay in the United States, use Form 8843 (Statement for Exempt Individuals).
Your sponsor or employer will give you a Form W-2 if you have received compensation for your services. Your school or institution will also give you a Form 1042-S if you have received a taxable stipend or grant (e.g. housing allowance). Please keep these documents as you will need them when filing a return.
Do international students need an ITIN?
An ITIN, or Individual Taxpayer Identification Number, is only required for international students who receive taxable income. You do not need an ITIN to file Form 8843.
ITINs are only issued to people who are not eligible for a Social Security Number (SSN). If you qualify for an SSN, you do not have to apply for an ITIN.
You will need an ITIN or SSN if you want to work in the U.S. or if you expect to receive taxable income in the form of wages, stipends, or grants. All federal tax documents require a taxpayer identification number.
How to file an international student tax return?
Filing an international student tax return can be particularly confusing, especially if you are not familiar with the U.S. tax system. To ensure an accurate return, your best course of action is to talk to a tax professional.
TFX is the preferred tax partner for international students in the United States. You can trust our team of tax experts to help with your tax situation during your stay.
Thank you, Veronica!