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Everything J-1 visa holders need to know about taxes

Visa-holders are subject to local laws—including taxes. Below, we explain the tax obligations of J-1 visa holders living and working in the U.S.

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Since the 1960s, thousands of people each year have come to live, study and work in the U.S. through the J-1 exchange visitor visa program.

Through the program, foreign nationals can travel to the U.S. and participate in different programs offered by approved sponsors. Visa-holders are subject to local laws—including taxes. Below, we explain the tax obligations of J-1 visa holders living and working in the U.S. 

How J-1 visa holders are viewed by the Internal Revenue Service

The Internal Revenue Service (IRS) is the government agency that enforces the federal tax code. States have their own individual state departments of revenue, which manage taxes at the state level while some municipalities and counties like New York City, for example, also charge local taxes.

For tax filing purposes, J-1 visa holders are deemed as “nonresident aliens” during their stay and are typically required to pay federal, state and local taxes. They are also typically expected to file annual reports (also known as tax returns) with the IRS about their income.

For more information on taxes for non-residents and other foreign nationals living and working in the U.S., the IRS provides an annual Publication 519 U.S. Tax Guide for Aliens. This comprehensive publication addresses the most common tax questions among visitors.

U.S. taxes for J-1 exchange visitors

When you work in the U.S. through your J-1 visa sponsor, your taxes are usually withheld from your income during each pay cycle. J-1 visa holders are typically only responsible for paying income taxes on the income that they earn from U.S. sources. The amount of taxes to pay will depend on the amount you earn and where you work because taxes differ between states. 

Income taxes in the U.S.

J-1 visa holders are usually taxed on the following:

  • Income earned from working in the U.S.

  • Stipends, awards, grants, and fellowships

  • Other income earned from U.S. sources

Depending on the location of where you work in the U.S., there are up to four types of taxes that you may be required to pay from your earnings, such as:

  • Federal taxes

  • State taxes

  • Local taxes

  • Federal Insurance Contributions Act (FICA) taxes

Some states like Florida, Nevada, Texas and Washington do not charge state income taxes.

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Federal income tax brackets

There are currently seven federal income tax brackets. Here are the 2019 tax brackets as well as typical tax obligation within each income band:

  • 10% for people earning $0 to $9,525 - 10% of taxable income

  • 12% for people earning from $9,526 to $38,700 - $952.50 and 12% on the amount that exceeds $9,525

  • 22% for people earning $38,701 to $82,500 -  $4,453 and  22% of the amount that exceeds $38,700

  • 24% for people earning $82,501 to $157,500 - $14,809.50 and 24% on the amount that exceeds $82,500

  • 32% for people earning from $157,501 to $200,000 -  $32,089.50 and 32% of the amount that exceeds $157,500

  • 35% for people earning from $200,001 to $500,000 -  $45,689.50 and 35% on the amount that exceeds $200,000

  • 37% for people earning 500,001 or more - $150,689.50 and 37% on the amount that exceeds $500,000

If you fall in a specific tax bracket, it does not mean that you will pay that percentage on everything that you earn. The U.S. has a progressive tax system. If you have a higher taxable income, you will be charged higher rates. If you have a lower taxable income, you will be charged lower rates. The rates for the different tax brackets only apply to the specific portion of your taxable income. 

State income taxes

Some states charge flat income taxes while others charge graduated income taxes; others do not charge any income taxes at all. The District of Columbia and 43 states collect state income taxes. These taxes are collected in addition to federal income taxes.

The rate that you pay depends on the state in which you work with your J-1 visa. This makes it important for you to understand what the different states charge to provide you with more information about where you might want to live with your J-1 visa. The following five states have the highest combined state and local tax rates:

  • New York

  • Connecticut

  • New Jersey

  • Illinois

  • California

The following states charge flat income tax rates:

  • Colorado

  • Illinois

  • Indiana

  • Massachusetts

  • Michigan

  • North Carolina

  • Pennsylvania

  • Utah

States that do not charge any personal income taxes include the following:

  • Alaska

  • Florida

  • Nevada

  • South Dakota

  • Texas

  • Washington

  • Wyoming

Local taxes

A minority of states and Washington, D.C. allow cities and counties to charge local income taxes in addition to any state and federal income taxes that you might be charged. The states that allow cities and counties to collect additional local income taxes include:

  • Alabama

  • California

  • Arkansas

  • Colorado

  • Indiana

  • Delaware

  • Kentucky

  • Iowa

  • Michigan

  • Maryland

  • Missouri

  • New York

  • New Jersey

  • Oregon

  • Ohio

  • Pennsylvania

Not all of the cities and counties within the states charge local income taxes. If your J-1 exchange visitor program is located in one of these states, ask your sponsoring institution whether local income taxes will also be assessed.

FICA taxes

FICA taxes fund the Social Security and Medicare programs. These programs pay for benefits for retired people, disabled people and the children of the deceased. As a non-resident J-1 visa holder, you should not be charged any FICA taxes. However, your employer may possibly withhold it from your paychecks. If this happens, you should apply for a tax refund. To check if you are eligible for a refund and to receive a guide on how to apply for it, please enter you details in to the form below.

Check if your eligible for a FICA Tax refund

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Sales taxes

Another type of tax that you will likely encounter in the U.S. is the sales tax. This is not an income; rather, it is a tax on services and goods purchased. For example, when you go to a restaurant and see a price on the menu, it is not the price that you will pay. Instead, the bill will include a sales tax in addition to the listed menu price.

Like state and local taxes, sales taxes vary between states. Five states, including Alaska, Montana, Delaware, Oregon, and New Hampshire,  do not levy sales taxes.

Individuals interested in working in the U.S. should either have Social Security number (SSN) or Individual Tax Identification Numbers (ITIN). The ITIN is used to identify you for tax purposes. Include your ITIN on your tax returns and other tax-related documents. To get an ITIN, complete IRS Form W-7.

An ITIN is typically required for the following:

  • You receive grant, fellowship, or scholarship income and are not eligible for an SSN

  • You want to claim a tax treaty benefit

  • You need to file a tax return and are ineligible for an SSN

  • You want to file a tax return for a refund

  • You are a resident alien

J-1 visa holders may also be able to get SSNs. To get an SSN, your visa must be validated by your sponsor. After this step, you can make a Social Security appointment at your local Social Security office where you will be required to bring the following documents:

  • Form SS-5

  • Form DS-2019

  • Letter of sponsorship

  • Printed I-94 travel record

  • Passport with your J-1 visa

  • Form DS-7002

  • Offer letter from the employer if applicable

If you receive a tax number or SSN and have earned income from a U.S. employer, you must file an income tax return. It may take up to eight weeks to receive an ITIN.

Required tax forms for J-1 visa holders 

Most J-1 exchange visitors will either need to file a 1040-NR or a 1040NR-EZ form. If you do not earn income while living in the U.S., you will still be required to file Form 8843 no later than the tax filing deadline.

The 1040NR-EZ and the 1040NR forms are similar, with the 1040NR-EZ being a shorter version of the other form. You can fill out a questionnaire from the IRS to determine which of these two forms you should file.

The W-2 form

U.S. employers are typically required to provide their employees with W-2 forms each year. This form tells the IRS how much money you have earned and the taxes that have been withheld from your paychecks. You may need this document to fill out your tax return. Your sponsoring organization should typically send the W-2 form to you by Jan. 31 of each year. If you do not receive your W-2 form by that date, you may talk to the organization's human resources department.

Form 8843

As a J-1 exchange visitor, you may be required to file Form 8843 even without an income from U.S. sources during your stay. This form is a statement for exempt individuals and can be found here.

Tax treaties

The U.S. has tax treaties with a number of different countries. If your country has a tax treaty, you may be taxed at a lower rate or be exempted from federal tax on your income from specific sources, including dividends, royalties, interest, pensions, and capital gains. The reductions in rates and exemptions will depend on the country you’re from and the types of income that you earn. Currently, the U.S. has tax treaties with the following countries:

  • Australia

  • Austria

  • Barbados

  • Bangladesh

  • Bulgaria

  • Belgium

  • Canada

  • Cyprus

  • China

  • Commonwealth of Independent States

  • Czech Republic

  • Egypt

  • Denmark

  • Estonia

  • France

  • Finland

  • Germany

  • Hungary

  • Greece

  • India

  • Iceland

  • Indonesia

  • Israel

  • Ireland

  • Jamaica

  • Italy

  • Japan

  • Republic of Korea

  • Kazakhstan

  • Lithuania

  • Latvia

  • Luxembourg

  • Mexico

  • Malta

  • Morocco

  • New Zealand

  • Netherlands

  • Norway

  • Philippines

  • Pakistan

  • Poland

  • Romania

  • Portugal

  • Russia

  • Slovenia

  • Slovak Republic

  • South Africa

  • Sri Lanka

  • Spain

  • Switzerland

  • Sweden

  • Trinidad and Tobago

  • Thailand

  • Tunisia

  • Ukraine

  • Turkey

  • Venezuela

  • United Kingdom

You can read more information about the tax treaty between your country and the U.S. here.  

The saving clause in tax treaties

The saving clause contained in most tax treaties preserves the rights of the countries to tax its residents. If you become a U.S. resident, you will lose most of the rights that you have under the tax treaty that the U.S. has with your home country. However, many treaties preserve the ability to claim benefits after you become a U.S. resident. The purpose of the saving clause is to prevent U.S. citizens and residents from using tax treaty provisions to avoid taxes on their U.S.-source income.

If your country does not have a tax treaty with the U.S., or it does not cover the type of income that you earn in the U.S., you may have to pay income taxes at the same rates that are shown for your U.S. tax return. Some states may not honor tax treaties when they assess state income taxes.

Deductions for J-1 visa holders

In general, J-1 visa holders cannot claim the standard deduction but may be able to claim some types of itemized deductions, including:

  • Local and state income taxes

  • Charitable contributions that you make to U.S. non-profits

  • Losses from casualty and theft

  • Miscellaneous deductions

  • Necessary and ordinary expenses involving a U.S. trade or company

Do not claim the American Opportunity Tax Credit

As a J-1 exchange visitor, you are typically not allowed to claim the American Opportunity Tax Credit (AOTC), a tax credit for U.S. residents who are studying in the country. If you file an illegal tax return and are audited, you will have to repay this money to the IRS and will be fined. It may also affect your future applications for U.S. visas.

Social Security and Medicare taxes

Some non-residents pay Social Security and Medicare taxes, but as a J-1 visa holder, you may be exempt. The Social Security Administration's withholding policy can be found here. Check with a tax professional to learn whether you are exempt from paying these taxes. If you are exempt from paying, file Form 8316 to request a refund of Social Security taxes that were withheld from your wages and Form 843 to claim a refund.

J-2 visa holders and tax returns

J-2 visa holders are also required to file tax returns. If you are a J-2 visa holder who has not earned U.S. income, you are typically required to file Form 8843. If you have earned money, you will need to file the 1040NR-EZ or 1040NR. You should talk to a tax professional who knows about J visas and taxes to get further information regarding this.

Paying taxes that you owe or receiving a refund

If you find that you underpaid your taxes when you fill out your tax return, you will need to pay your balance to the IRS. You can pay your taxes online with a debit card or credit card on the IRS website.

If you overpaid your taxes during the tax year, the IRS will send you a refund. You can check the status of a refund for a return that you have e-filed here.

State income tax returns

In addition to your federal return, you may need to file a state income tax return. Many tax preparation services in the U.S. help people with both their state and federal returns. If you want to prepare and file your state income tax return on your own, check the website for your state's Department of Revenue.

Filing extensions 

If you are unable to file your return by the tax filing deadline, you can request an extension. An extension will provide you with six additional months to file your return. The extension request must be filed by the tax filing deadline. If you owe money, interest will accrue on the balance until you file and pay.

Failing to file the required tax returns

If you fail to file your tax return, the IRS will create a return for you when it receives the W-2 form from your employer. You will then be liable to pay the tax that appears on this return. If you want to come back to the U.S. in the future, you will owe this unpaid tax plus penalties and interest.

The takeaway

To better understand how to deal with your tax obligations, look for a professional who understands the tax issues of J-1 and J-2 visa holders. You can check with your host organization's human resources department for recommendations of competent tax professionals in your area.  

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