Residency status drives everything

• How U.S. tax residency is determined. You are a U.S. resident for tax purposes in a calendar year if you meet either the green card test or the substantial presence test. H‑1B holders typically meet the substantial presence test if they are physically present in the U.S. at least 31 days in the current year and 183 weighted days over the current year and the two prior years (all days current year, 1/3 of days in the first prior year, and 1/6 of days in the second prior year). H‑1B days are generally counted; the “exempt individual” day‑exclusion rules apply to certain students, trainees, diplomats, etc., not to H‑1B. If you meet the test, you’re taxed like a U.S. resident on worldwide income; if not, you’re a nonresident taxed only on certain U.S.‑source income and income effectively connected with a U.S. trade or business Substantial presence test; Topic no. 851, Resident and nonresident aliens.

• Residency starting and ending dates. Your “residency period” usually begins on the first day during the year you meet the substantial presence test while present in the United States and ends on the last day of the year in which you are last a resident (with special rules for closer connection and treaty claims). The IRS page on residency dates explains first‑year and last‑year rules, the de minimis exclusion concept for determining the starting/ending date (not for meeting the presence test), and provides practical examples Residency starting and ending dates.

• First‑year choice if you just miss residency. If you do not meet the substantial presence test in your first calendar year but will meet it the next year, you may be able to make the “first‑year choice” to be treated as a resident for part of the first year if you are present for at least 31 consecutive days in the first year and for at least 75% of the days from the start of that 31‑day period through year‑end (you can treat up to five absence days as days of presence). This creates a dual‑status year—nonresident for part of the year and resident for the rest Residency starting and ending dates.

• Dual resident under a treaty (tie‑breaker). If you are a resident under U.S. rules and also a resident under another country’s rules, an income tax treaty may “tie‑break” you to the other country for treaty purposes. If you claim treaty benefits as a nonresident of the United States, you generally disclose the treaty position and compute your U.S. tax consistent with nonresident rules for the treaty‑covered items (often with Form 8833). See the IRS general residency overview and the Form 1040‑NR instructions for disclosure mechanics Topic no. 851, Resident and nonresident aliens; 2024 Instructions for Form 1040‑NR.

How your income is taxed by status

• Resident aliens. If you’re a resident alien for a year, you’re taxed like a U.S. citizen on worldwide income and typically file Form 1040 or 1040‑SR by April 15 (for calendar‑year taxpayers). Your withholding and credits/deductions follow the same general rules as U.S. citizens Topic no. 851, Resident and nonresident aliens.

• Nonresident aliens. If you’re a nonresident, you generally file Form 1040‑NR and report only U.S.‑source income and income effectively connected with a U.S. trade or business (ECI). Nonresident filing statuses are limited (generally Single, Married Filing Separately, Qualifying Surviving Spouse in narrow cases). Nonresidents cannot claim the standard deduction (with a limited exception for certain Indian students), and allowable credits are more limited than for residents. The IRS nonresident page and Form 1040‑NR instructions outline filing status, deductions, adjustments, credits, and other rules Taxation of nonresident aliens; 2024 Instructions for Form 1040‑NR.

• Dual‑status aliens. If you are both a nonresident and a resident in the same year (for example, you arrive mid‑year and meet the substantial presence test), you have a dual‑status year and must follow special filing and labeling rules (resident part is typically on Form 1040 with “Dual‑Status Return,” with a Form 1040‑NR “Dual‑Status Statement” attached, or vice versa, depending on which part of the year applies). IRS Publication 519 consolidates the dual‑status guidance and practical examples Publication 519 (2024), U.S. Tax Guide for Aliens.

Social Security and Medicare (FICA) taxes for H‑1B workers

• FICA generally applies to H‑1B wages. Wages paid for services performed in the United States are generally subject to Social Security and Medicare (FICA) taxes unless a specific U.S. law or an applicable international Social Security (“Totalization”) Agreement provides an exemption. The IRS discusses international Social Security coverage coordination and where exemptions may apply Foreign agricultural workers on H‑2A visas (Totalization Agreements section).

• Totalization Agreements may exempt FICA. The United States has bilateral Totalization Agreements that prevent dual Social Security coverage. If you remain covered by your home country’s system under an agreement (commonly under a temporary “detached worker” provision) and obtain a Certificate of Coverage from your home country’s social security authority, you can present it to your U.S. employer to claim an exemption from U.S. FICA for the covered period Foreign agricultural workers on H‑2A visas (Totalization Agreements section).

Federal income tax withholding and your paycheck

• Withholding on wages. Your employer must withhold federal income tax from your pay. If you are a resident, withholding works like for any U.S. employee; complete Form W‑4 and update as needed. If you are a nonresident, special W‑4 rules apply; your employer will compute withholding accordingly. You can always fine‑tune withholding by submitting an updated Form W‑4 2025 Form W‑4; Topic no. 851, Resident and nonresident aliens.

• Employer reporting. H‑1B wages are generally reported on Form W‑2. If you later claim any applicable treaty benefit on your return, follow the Form 1040‑NR instructions on how to disclose and report the impacted income 2024 Instructions for Form 1040‑NR.

Which return to file, forms, and deadlines

• Form 1040 vs. Form 1040‑NR. File Form 1040 if you are a U.S. tax resident for the year; file Form 1040‑NR if you are a nonresident. In a dual‑status year, follow the dual‑status filing rules. The IRS instructions for Form 1040‑NR explain who must file, when to file, what schedules to include (Schedules 1‑3, Schedule NEC for non‑effectively connected income, Schedule A for itemized deductions available to nonresidents, Schedule OI disclosures), and due dates (generally April 15 if you had wages subject to withholding; June 15 if you had no wages subject to withholding) 2024 Instructions for Form 1040‑NR; 2024 Form 1040‑NR.

• Filing deadlines and extensions. If you had wages subject to withholding, your due date is generally April 15. If you had no wages subject to withholding, your due date is generally June 15. You can request an automatic extension with Form 4868; interest/penalties can accrue on any unpaid balance from the original due date, so consider making an extension payment Topic no. 851, Resident and nonresident aliens.

• SSN vs. ITIN for you and family members. Most H‑1B employees are eligible for and must use a Social Security Number (SSN). If your spouse or dependents are not eligible for an SSN but must be identified on your U.S. return (for example, to file jointly under the nonresident spouse election or to claim allowable credits for residents), they may need an ITIN obtained by filing Form W‑7 with required documentation. The Form W‑7 instructions explain when a dependent or spouse qualifies, what “allowable tax benefit” must be shown, and how to submit the application (including through certified acceptance agents). Do not submit Form W‑7 if the person is eligible for an SSN Instructions for Form W‑7.

Key versions of “income” for nonresidents

• Effectively connected income (ECI). Wages paid for services performed in the United States are generally ECI; this income is reported on page 1 of Form 1040‑NR and taxed at graduated rates like residents, subject to itemized deductions allowed to nonresidents Taxation of nonresident aliens.

• U.S.‑source FDAP income not ECI. Interest, dividends, some royalties, certain capital gains, and other fixed or determinable annual or periodic (FDAP) income that is not effectively connected is typically taxed on a gross basis at 30% unless a treaty reduces the rate; this income is reported on Schedule NEC of Form 1040‑NR Taxation of nonresident aliens.

Choosing to file jointly with a nonresident spouse

• Election to file jointly. A married H‑1B taxpayer who is a U.S. citizen or resident at year‑end may elect with a nonresident spouse to treat the spouse as a U.S. resident for the entire year, allowing a joint return and resident rules for income, deductions, and credits. This choice has broad consequences, including reporting worldwide income for both spouses for the year and generally limiting treaty claims as “residents of a foreign country.” The IRS explains how to make, suspend, and end this choice and how it interacts with filing status options Nonresident spouse.

Common scenarios for H‑1B workers

• “I arrived mid‑year and worked through December.” If you arrive early enough (often on or before July 2 with continuous presence), you may meet the substantial presence test that same year; if you arrive later, you may not meet it until the following year. The substantial presence rules and first‑year choice page illustrate typical arrival‑year outcomes and how the first‑year choice can create a dual‑status year when you just miss the test Substantial presence test; Residency starting and ending dates.

• “Do I ever exclude days as an ‘exempt individual’?” Generally not on H‑1B. The student/teacher/exempt individual rules for excluding days (e.g., J, F visas) do not apply to H‑1B visa holders. Your physical presence days count for the substantial presence test unless a different exclusion (such as brief transit days, certain medical conditions, or regular commuters from Canada/Mexico) applies Substantial presence test.

• “Do I qualify for the closer connection exception?” Even if you meet the substantial presence test, you can be treated as a nonresident if you’re present in the U.S. fewer than 183 days in the current year, you maintain a tax home in a foreign country during the year, have a closer connection to that country than to the U.S., and you timely file Form 8840. See the substantial presence page for details Substantial presence test.

Treaties and H‑1B workers

• Wage treaty exemptions are uncommon for long‑term H‑1B assignments. Treaty articles that exempt employment income are often limited (e.g., short‑term assignments, specific categories). If a treaty applies to reduce U.S. taxation on personal services compensation, you must disclose and support the position as instructed in the Form 1040‑NR instructions (often with Form 8833). Always review the specific treaty text for your country and disclosure requirements 2024 Instructions for Form 1040‑NR.

• Treaty tie‑breaker residency. If you’re resident under both countries’ laws, you can apply the treaty tie‑breaker. For U.S. tax computation on treaty‑covered items, you’ll file consistent with nonresident rules for those items and attach the applicable disclosure; for other code purposes you may still be treated as a resident unless specific rules apply. See the IRS general residency overview and examples pages for context Topic no. 851, Resident and nonresident aliens; Tax residency status examples.

Practical payroll and filing steps

• Form W‑4. Complete Form W‑4 when you start a job and update it when your residency status changes. Nonresidents follow special W‑4 steps; residents complete it like U.S. employees. Employers rely on your latest W‑4 to compute withholding 2025 Form W‑4.

• Forms you may encounter. Employees typically receive Form W‑2 for wages; you’ll file Form 1040 (resident) or 1040‑NR (nonresident), with schedules and forms as needed (Schedule A for nonresident itemized deductions, Schedule NEC for non‑ECI U.S.‑source income, Schedule OI for disclosures, Form 8833 for treaty positions, and Form W‑7 for ITIN applications). Form 1040‑NR instructions include a roadmap of which schedules you may need 2024 Instructions for Form 1040‑NR; 2024 Form 1040‑NR; Instructions for Form W‑7.

• Keep FICA in mind year‑round. Confirm whether a Totalization Agreement applies and, if so, obtain and furnish the Certificate of Coverage promptly. Otherwise, H‑1B wages are generally subject to U.S. Social Security and Medicare taxes Foreign agricultural workers on H‑2A visas (Totalization Agreements section).

Where to learn more (official resources)

• Substantial presence test: Substantial presence test

• Residency starting and ending dates (including first‑year choice): Residency starting and ending dates

• Resident vs. nonresident overview and due dates: Topic no. 851, Resident and nonresident aliens

• Publication 519 (comprehensive guide for resident/nonresident/dual‑status): Publication 519 (2024)

• Nonresident filing rules and treaty basics: Taxation of nonresident aliens; 2024 Instructions for Form 1040‑NR

• Nonresident spouse joint‑filing election: Nonresident spouse

• ITIN applications (Form W‑7): Instructions for Form W‑7

• Form W‑4 for payroll withholding: 2025 Form W‑4

Wrapping up

For H‑1B workers, residency status is the hinge that determines which return you file, how your income is taxed, and what credits and deductions are available. If you are on the cusp of the substantial presence test in your first year, consider whether the first‑year choice makes sense; if you’re a resident under both U.S. and foreign law, evaluate whether a treaty tie‑breaker applies and what that means for your U.S. return and disclosures. Finally, coordinate early with your employer on W‑4 status and Social Security coverage, and use the IRS’s official pages above whenever you need the precise rule or form for your circumstances Substantial presence test; Topic no. 851, Resident and nonresident aliens; Publication 519 (2024).