Do tax obligations change when switching from F-1 to H-1B?
Yes! Your tax obligations do change when you switch from F-1 to H-1B status, mainly because your tax residency status and tax rules differ under each visa.
Key Changes When Switching from F-1 to H-1B:
| Aspect | On F-1 Visa (Nonresident Alien) | On H-1B Visa (Resident Alien) |
|---|---|---|
| Tax Residency Status | Usually Nonresident Alien (first 5 years) | Usually Resident Alien (after meeting Substantial Presence Test) |
| Filing Form | Form 1040-NR | Form 1040 (regular resident tax form) |
| Standard Deduction | Usually not allowed (except for India treaty) | Allowed (full standard deduction) |
| Tax Rates | Generally higher rates on certain income | Taxed at regular graduated rates |
| FICA Taxes (Social Security & Medicare) | Exempt for first 5 years | Required to pay |
| Tax Credits & Deductions | Limited eligibility for credits/deductions | Eligible for most tax credits and deductions |
When Does the Switch Happen?
-
You become a resident alien for tax purposes once you pass the Substantial Presence Test (SPT), which usually happens in the calendar year you switch to H-1B (or after 5 calendar years on F-1).
-
Resident aliens are taxed like U.S. citizens on worldwide income.
What You Should Do:
-
Determine your tax residency status each year.
-
File the appropriate tax return (1040-NR if nonresident, 1040 if resident).
-
Report worldwide income if resident alien.
-
Pay FICA taxes starting with H-1B employment.
-
Take advantage of deductions and credits if resident.
Example:
-
You were on F-1 for 3 years (nonresident alien).
-
You switch to H-1B in year 4 and meet the SPT.
-
For year 4 taxes, you file Form 1040 as a resident alien, pay FICA taxes, and can claim the standard deduction.
If you want, I can help you figure out your residency status, which forms to file, and how to handle the transition smoothly!
