H-1B visa holders working in the U.S. must pay federal, state, and local taxes similar to American citizens, but the deductions they can claim depend on whether they are considered tax residents or nonresidents.
Typically, H-1B workers pay 25%–35% of their income in taxes, which may include:
- Federal income tax
- State income tax (depending on the state)
- Local or city taxes
- Social Security and Medicare taxes
- Property and sales taxes
- Capital gains tax
- Gas and lodging taxes
- Estate or inheritance taxes (in some cases)
✔️ Nonresident vs. Resident for Tax Purposes
Your immigration status and your tax status are not the same. Even though H-1B workers are nonimmigrants, the IRS may still classify them as U.S. tax residents based on their physical presence.
✔️ Nonresidents
If you are a nonresident alien, you:
- Pay tax only on U.S.-sourced income
- File Form 1040NR
- Cannot claim most standard deductions available to U.S. residents
✔️ Residents
If classified as a resident for tax purposes, you:
- Are taxed on your worldwide income
- Can claim various deductions and credits
- File the standard Form 1040
🧮 Substantial Presence Test (SPT)
Most H-1B workers become tax residents through the Substantial Presence Test, which looks at how many days you have physically stayed in the U.S. over a three-year period.
To qualify, you must have:
- 31 days in the U.S. during the current year AND
- 183 days total based on the formula:
- All days in the current year
- 1/3 of days from the previous year
- 1/6 of days from two years prior
Even one part of a day counts as a full day.
Example Scenarios
Scenario 1 — Resident in Year 1
If you arrive on or before July 2 and remain through December 31, you will exceed 183 days and qualify as a tax resident for that year.
Scenario 2 — Not a resident in Year 1
If you arrive on or after July 3, you will fall short of 183 days for the three-year calculation and remain a nonresident in Year 1.
However, if you stay at least 122 days in Year 2, you will qualify as a tax resident in Year 2.
🌍 Double Taxation & Tax Treaties
Some H-1B holders may become tax residents in both the U.S. and their home country, resulting in dual residency.
To avoid being taxed twice, the United States has tax treaties with many nations. These treaties include tie-breaker rules that determine which country has primary taxing rights on specific income.
