6 Types of Taxes Every H1-B Visa Holder Pays in the US

Nitin Jacob

Feb 14 2024

<div style=' background:#FFFFFF;color:#000000;font-family:Verdana;width:auto;padding:5px;max-height:100%;'><span><p>For an Indian, an H1-B visa is a passport to their great American dream! You gain money, respect, and an international experience on your résumé. You do, however, earn in dollars and pay taxes in dollars.</p><p>If you’re unfamiliar with the H1-B holder tax filing process, we’ve put together a step-by-step guide to help you get it right.</p><p><a href="https://www.irs.gov/individuals/international-taxpayers/substantial-presence-test">Substantial Presence Test (SPT)&nbsp;</a></p><p>Passing the SPT is essential for becoming a tax resident in the United States. You must have spent at least 183 days in the United States over the previous three years to pass this test. Under the SPT, even the days for each year are subdivided further.</p><p>You should have spent 31 days in the United States during the year in which you do your H1-B visa holder tax return. Then it’s 1/3 of days for the previous year and 1/6 of days for the earlier two years. So the total number of days in the three years should be at least 183.</p><p>6 Types of Taxes you Pay During H1-B Holder Tax Filing</p><p>According to the US tax code, when you qualify for the SPT for H1B holder tax filing, around 25% to 35% of your income will be taxed. Therefore, you will pay the same taxes as any other US tax resident, but you may not receive the same benefits.&nbsp;</p><p>However, the following taxes you will pay during the H1-B holder tax filing:</p><p>Social Security&nbsp;</p><p>Contributing to social security is similar to putting money down for a rainy day fund that will pay off in your golden years. In addition, it will assist you in obtaining a pension when you retire. As a rule, you must contribute 6.2% of your gross salary to this account. In addition, your company will make a matching contribution to the social security fund.</p><p><a href="https://www.medicare.gov/">Medicare</a></p><p>This tax, like your pension, covers medical expenditures after you retire. Medicare costs 1.45 % of your gross wage, and your employer contributes an equal amount. Whether or not you stay in the United States after retirement has no bearing on your Medicare and Social Security taxes payment.</p><p>Federal Income Tax</p><p>As an H1-B visa holder, you will pay a federal income tax of 25% to 28% on your taxable income. It is determined by your annual income and your filing status (married or single). Furthermore, you will be taxed the same as a US resident if you file as a non-resident foreigner, but you may not be eligible for the same tax incentives. However, if you choose to file as a resident, you will receive some tax benefits. As a result, assess the benefits and drawbacks before proceeding with H1B holder tax filing.</p><p>State Income Tax</p><p>The state of residence in the United States has a significant influence in determining whether or not you are tax liable. In California, for example, state taxes range from 6.5 % to 10% of one’s gross income. While Alaska, Florida, Nevada, Wyoming, Washington, and South Dakota do not have a separate income tax for non-residents. In addition, you will be taxed on the interest and dividends you earn in the United States in states like Tennessee and New Hampshire.</p><p>Local Taxes</p><p>Indian H1B visa holders must pay local taxes of 4% of their gross income. This tax depends on where you stay in the United States. Some towns and cities incur local income taxes.&nbsp;</p><p>Please note, though, that in most cases, your local taxes will be covered in your paycheck by your employer as long as you’ve updated the address in your W4 form. However, if you accidentally put the wrong address in the W4 form, you may pay the wrong local taxes.&nbsp;</p><p><a href="https://www.hhs.gov/healthcare/index.html">Obamacare&nbsp;</a></p><p>Under Obamacare, your US company will cover the cost of your healthcare. For now, this is a compulsory tax you, as an Indian H1-B visa holder, will be paying; however, this might change.&nbsp;</p><p>H1-B holder tax filing: Documents Required:</p><p>It’s critical to get your papers before initiating the H1B holder tax filing procedure. Keep the following documents ready:</p><p>1) Social security number</p><p>2) W-2 tax form</p><p>3) A photo identification card</p><p>4) Other sources of investment income</p><p>5) Form 1040 NR if you have dependents</p><p>6) Receipts that can be used to claim tax deductions</p><p>7) If you or your spouse relocated due to your marriage, fill out Form 8852.</p><p>8) If you changed your name after marriage, you’ll need to fill out Form SS-5.</p><p>9) Complete Form W 4 to report a change in income after marriage.</p><p>If you are looking for professional advice on filing your taxes for this year, click here <a href="https://www.aotax.com/">https://www.aotax.com/</a> for a free draft from AO Tax, the experts on tax consultation for Indians in the United States.</p><span></div>

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