US-taxes-for-international-students (1)

international students are exempt from U.S. tax on payments from abroad and up to $9,000 in personal
services income for students and business trainees.
Example: Hans receives $2,500 for working in a lab as a research assistant in his third year of
school. Under Article 20(4) of the U.S.-Germany Tax Treaty, these payments are exempt from U.S.
tax as long as he receives less than $9,000 per year and isn’t present in the U.S. for more than four
years.
Special treaty rules for international students from Canada, China, and India
The U.S.-Canada Tax Treaty is unique because it exempts all earned income for nonresident students if
they don’t earn more than $10,000 in the tax year but allows the U.S. to tax all income if the nonresident
earns more than $10,000 in the year. Also, Canadian students who become resident aliens lose this
benet.
Under the U.S.-China Tax Treaty, students who are residents of China for treaty purposes are exempt from
certain payments including payments from abroad, grants, and up to $5,000 per year in personal services
income. Nearly all U.S. tax treaties limit benets to a specic number of years and sometimes benets
are lost when a taxpayer becomes a resident alien. Unlike other treaties, the provisions of the U.S.-China
Tax Treaty are not limited by a number of years.
Example: Mei is enrolled in medical school in the U.S. where she rst arrived as a student on Mar.
13, 2018. Mei will remain in the U.S. for school until August of 2024 when she nishes her studies.
Although Mei will likely be a resident alien for U.S. tax purposes in the sixth year (2023), she would
still qualify to claim the treaty benets allowed to students under the treaty, assuming she still
meets the denition of a student and the requirements of her visa.
Under the U.S.-India Tax Treaty, Indian students are allowed a standard deduction on Form 1040NR equal
to the amount allowed on Form 1040. They are also allowed a personal exemption for a nonworking
spouse and U.S.-born children. While the TCJA suspends personal exemptions for tax years 2018 through
2025, Indian students can still claim the standard deduction. However, they can only use the standard
deduction for Single and Married Filing Separate taxpayers ($12,000 for 2018) because nonresidents
can’t le a joint return on Form 1040NR.
The rules for residency don’t apply to state return ling
Depending on the nonresident alien students’ state, they may also be required to le state tax documents.
The rules that apply to international students for U.S. federal income tax purposes don’t apply to statelevel
residency determinations. Some states allow international students to exclude days for state
residency purposes while others do not. Each state’s residency rules must be consulted to determine
whether the international student must le a resident or a nonresident state return.
Also, some states allow treaty benets on the state return. Depending on where the payment to the
international student originates, income may be taxable on a state return and cannot be excluded by
treaty.