The U.S. tax system treats F-1 students based on tax residency, not immigration status. Most students are considered nonresident aliens (NRAs) during their first years in the U.S., which affects how they are taxed, what forms they must file, and which benefits they can claim. These rules come from the Internal Revenue Code, Treasury Regulations, and IRS guidance, including Publication 519 and the instructions for Forms 8843 and 1040-NR.
Tax Residency: The Starting Point
Before filing any tax forms, an F-1 student must determine whether they are a nonresident alien (NRA) or a resident alien (RA) for tax purposes.
Key authorities:
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- IRC §7701(b): Creates the Substantial Presence Test (SPT), the main rule for determining tax residency.
- Publication 519: Explains that F-1 students are “exempt individuals” for SPT purposes for their first five calendar years, meaning those days do not count toward residency.
- Form 8843 instructions: Require students to claim this exempt status each year.
Practical results:
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- Years 1–5 in F-1 status: Usually treated as nonresident aliens.
- After 5 calendar years: Students begin counting presence days under the SPT; many become resident aliens once they meet the test.
Filing Required Even with No Income: Form 8843
All F-1 students who are NRAs must file Form 8843 every year—even if they earned no income at all.
Why?
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- Form 8843 documents the student’s exempt-individual status under the SPT.
- IRS rules do not provide a minimum income threshold for NRAs.
Simple rule: If you’re an NRA F-1 student, you must file Form 8843. If you had U.S. income, you must also file a tax return.
Federal Income Tax Returns: 1040-NR vs. 1040
Nonresident Aliens (most F-1 students in years 1–5)
If an NRA has U.S. income, they file:
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- Form 1040-NR
Taxed income usually includes:
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- On-campus wages
- CPT or OPT earnings
- Assistantships
- Taxable portions of scholarships or fellowships
Resident Aliens (after meeting the SPT)
Once a student becomes a tax resident, they file:
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- Form 1040 (same as U.S. citizens)
Resident aliens are taxed on worldwide income, not just U.S. income.
Scholarships, Fellowships, and Assistantships
Not all scholarship funds are tax-free for F-1 students.
General IRS rule:
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- Tax-free: Tuition, required fees, books, and course materials
- Taxable: Payments for living expenses (room, board, travel, stipends)
Taxable amounts are reported on Form 1040-NR for NRAs.
Treaty Benefits
Some students can reduce or eliminate tax through an income tax treaty. Treaty claims are usually made on:
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- Form 8233 (for wages or compensation), or
- Form W-8BEN (for scholarship/fellowship exemptions)
Payroll Taxes (FICA) During OPT/CPT
Most F-1 NRAs do not pay Social Security and Medicare taxes (FICA) during their first years.
Key rule:
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- Nonresident F-1 students (first 5 years): Generally exempt from FICA on authorized employment.
- After becoming a tax resident: FICA applies like normal wages.
State Tax Obligations
State tax rules are separate from federal rules. Many states require a tax return if the student earned wages—even if they are a federal nonresident.
A student may be a nonresident for federal tax purposes but still be required to file a state return based on state-specific rules.
Identification Numbers: SSN or ITIN
To file correctly, students need a taxpayer ID.
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- SSN: Required for employment
- ITIN: Used by students who are not eligible for an SSN but must file a return or claim treaty benefits
Deadlines and Penalties
Most filings are due April 15 or the next business day.
Consequences for not filing may include:
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- Losing refunds
- Penalties for unreported income
- Difficulty showing tax compliance for future immigration or visa applications
Common Compliance Mistakes
F-1 students frequently run into problems by:
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- Not filing Form 8843 every year
- Filing the wrong return (1040 instead of 1040-NR)
- Misreporting taxable scholarship income
- Misclaiming tax treaty benefits
- Paying FICA when exempt—or failing to pay once residency begins
We Can Help!
F-1 students follow a special tax framework. For the first five calendar years, most are nonresident aliens who must file Form 8843 annually and Form 1040-NR if they have income. Scholarship rules, treaty benefits, employment taxes, and state requirements can all affect their tax liability. Staying compliant protects both financial interests and future immigration filings.
Have questions or need advice? Contact our office for a confidential consultation today!
