11 MIN READ
Immigrants in the United Stated have to consider their immigration status when making financial decisions. Here are the Top 10 questions we have come across from our immigrant families along every phase of life:
- Do I need to pay Social Security and Medicare taxes on an F-1 visa?
- Can I get an ITIN if I am not a US Citizen?
- I’m an international student. Can I refinance my student loan?
- Is my MBA tuition tax deductible if I’m in international student?
- Should I invest in a 401(k), if I am in H1-B non-immigrant status?
- Can I buy a home on an H1B visa?
- What is the EB5 Green Card? How can I apply for it?
- I have bank accounts outside the United States. Do I need to disclose them?
- Do I pay income tax on inheritance or gifts from my non-US family?
- I’m not a US Citizen, am I still subject to US Estate Taxation?
General responses to these question are provided in the sections below. We highly encourage you to seek professional advice from your financial planner, tax professional, estate attorney, immigration attorney and legal council before implementing any of this general guidance. Please note: This data is for informational purposes only, and does not constitute a client-advisor relationship between MYRA and the reader.
#1: Do I need to pay Social Security and Medicare taxes on an F-1 visa?1
No. If you’re temporarily present in the United States in F-1, J-1, M-1, or Q-1/Q-2 nonimmigrant status, you are exempt from U.S. Social Security & Medicare taxes on wages paid to you for services performed within the United States as long as such services are allowed by USCIS, and such services are performed to carry out the purposes for which such visas were issued to you.
Examples of Exempt Employment include: (1) On-campus student employment up to 20 hours a week (40 hours during summer vacations), (2) Off-campus student employment allowed by USCIS, (3) Practical Training student employment on or off campus, (4) Employment as professor, teacher or researcher, and (5) Employment as a physician, au pair, or summer camp worker.
To learn more, or identify if you qualify for a Social Security or Medicare tax refund, email Support@MyraWealth.com
#2: Can I get an ITIN if I am not a US Citizen?2
Yes. IRS issues ITINs to foreign nationals and others who have federal tax reporting or filing requirements and do not qualify for SSNs. A non-resident alien individual not eligible for a SSN who is required to file a U.S. tax return only to claim a refund of tax under the provisions of a U.S. tax treaty needs an ITIN.
Other examples of individuals who need ITINs include: (1) A nonresident alien required to file a U.S. tax return, (2) A U.S. resident alien (based on days present in the United States) filing a U.S. tax return, (3) A dependent or spouse of a U.S. citizen/resident alien, and (4) A dependent or spouse of a nonresident alien visa holder.
An ITIN does not: (1) Authorize work in the U.S., (2) Provide eligibility for Social Security benefits, and (3) Qualify a dependent for Earned Income Tax Credit Purposes.
To learn more about ITINs, email Support@MyraWealth.com
#3: I’m an international student. Can I refinance my student loan?3
Yes. There are several firms that specialize in education loans and student loan refinancing for international students.
In most cases, in order to qualify, you may need to meet the following requirements: (1) You must have a job, (2) You need to be a non-U.S. citizen, (3) You can’t have U.S. permanent residence, (4) You must be refinancing a private student loan made by a U.S. lender, (5) Your degree must come from a program supported by the refinancer, and (6) The loans you refinance can’t be an existing loan from the same refinancer.
In addition, in some cases, you may also have to live in a state where the loan provider is a registered lender. If you don’t live in one of the available states, you may need to wait until they register in that state.
To learn more about your International Student Loan refinancing options, email Support@MyraWealth.com
#4: Is my MBA tuition tax deductible if I’m in international student?4
Maybe. For 2017, MBA students will qualify to claim an itemized deduction for their tuition and course materials if they meet the four criteria: (1) The student was established in a business profession prior to starting their MBA program, (2) The MBA courses enhanced the skills the student gained in the job prior to their MBA, (3) The student continues to use their enhanced skills after completing the MBA, and (4) The MBA cannot qualify the student for a new profession. If you have already filed your 2017 taxes, a prior year tax amendment maybe appropriate for you.
Starting with tax year 2018, MBA students will no longer be able to deduct the cost of their graduate school tuition and course materials as an itemized deduction for work-related education. The Tax Cuts and Jobs Act temporarily eliminates this deduction, along with other miscellaneous itemized deductions, for the years 2018 through 2025. Work-related education won’t become deductible again until the year 2026, and maybe never again if the new law is extended by a future act of Congress.
To learn more, or to assess if a prior year tax amendment to claim an MBA deduction is appropriate for you, email Support@MyraWealth.com
#5: Should I invest in a 401(k), if I am in H1-B non-immigrant status?5
Yes. Contributions to a 401(k) plan are highly recommended for H1-B visa holders, even if you’re uncertain of spending your retirement years in the United States.
There are several reasons why you should contribute: (1) Contributions to a 401(k) are tax-deferred in the contribution year. You only pay taxes when you withdraw. If you’re in a lower tax bracket during retirement, you will pay lower taxes, (2) If your employer provides a matching contribution, that’s FREE money! A 100% return – instantly, (3) You can take personal loan against your 401(k) – e.g. to pay unreimbursed medical expenses, (4) If you’re back in your home country, and not in the US before retirement, or need the money immediately for a financial hardship – pay a 10% early withdrawal penalty, and get access to your money –a great deal if you’re paying 0% taxes & have >10% growth.
To learn more about the benefits of enrolling in your employer’s 401(K) plan, email Support@MyraWealth.com
#6: Can I buy a home on an H1B visa?6
Yes. Mortgage companies these days are more and more comfortable in financing home loans to non-permanent residents on an H1B visa.
While the requirements vary by mortgage provider, here are some underwriting guidelines that will help you assess if you are an appropriate borrower (in the eyes of the mortgage provider): (1) your credit score is 720 or better, (2) you are willing and able to put down at least 20% of the home value (i.e. your loan-to-value ratio is 80% or lower), (3) you have a valid SSN or ITIN, (4) you have an existing U.S. source of income, and that source of income is expected to continue for at least 3 years, (5) you have been in the United States for at least 2 years, and (6) you have at least 2 years of work experience.
To learn more about the Home Buying process, email Support@MyraWealth.com
#7: What is the EB5 Green Card? How can I apply for it?7
EB5 Investor Program refers to the Employment Based Immigration, Fifth Preference Investor Program (or EB5 Green Card Program). The EB5 investor program is administered by the U.S. Citizenship and Immigration Services (USCIS).
The USCIS, through the EB5 Investor Program, grants immigrant entrepreneurs (and their spouses and unmarried children under 21) a green card (permanent residence) if they meet the following criteria: (1) They invest in a commercial enterprise in the United States, and (2) Plan to create or preserve 10 permanent full-time jobs for qualified U.S. workers.
The minimum investment required to qualify for the EB5 Investor Program is: (1) $500,000 in a Targeted Employment Area (High Unemployment or Rural Area), or (2) $1,000,000 in any new commercial enterprise in the United States.
To learn more about the EB5 Green Card, email Support@MyraWealth.com
#8: I have bank accounts outside the United States. Do I need to disclose them?8
Yes. If you have a bank account or investment funds or some other type of account held outside the United States, you may need to reveal the existence of those foreign accounts to the US federal government. This sort of asset disclosure is often unfamiliar to taxpayers. We are used to the concept of reporting one’s income and deductions to calculate one’s taxes. But asset disclosures come as a surprise to many as they are not directly related to the tax calculations. But this topic is especially important for Americans living and working abroad and for immigrants to the US, both of whom are likely to have financial assets outside of the country.
We need to report accounts held at financial institutions located outside the United States of America. On these reports, we include foreign financial accounts: (1) That you own, (2) That your spouse owns (if you are married and filing jointly), (3) That you jointly own with someone else, and (4) That someone else owns if you have signature authority or a financial interest over the account. It’s not just bank accounts that have to be reported.
To learn more about FBAR reporting, email Support@MyraWealth.com
#9: Do I pay income tax on inheritance or gifts from my non-US family?9
No. In general, a foreign gift is money or other property received by a U.S. person from a foreign person that the recipient treats as a gift or bequest and excludes from gross income. A “foreign person” is a nonresident alien individual or foreign corporation, partnership or estate.
If you are a U.S. person who received foreign gifts of money or other property, you may need to report these gifts on Form 3520, Annual Return to Report Transactions with Foreign Trusts and Receipt of Certain Foreign Gifts. Form 3520 is an information return, not a tax return, because foreign gifts are not subject to income tax. However, there are significant penalties for failure to file Form 3520 when it is required.
Note: A gift to a U.S. person does not include amounts paid for qualified tuition or medical payments made on behalf of the U.S. person.
To learn more about Estate & Gift Taxes, email Support@MyraWealth.com
#10: I’m not a US Citizen, am I still subject to US Estate Taxation?10
Yes. Deceased nonresidents who were not American citizens are subject to U.S. estate taxation with respect to their U.S.-situated assets. U.S.-situated assets include American real estate, tangible personal property, and securities of U.S. companies. A nonresident’s stock holdings in American companies are subject to estate taxation even though the nonresident held the certificates abroad or registered the certificates in the name of a nominee.
Exceptions: Assets that are exempt from U.S. estate tax include securities that generate portfolio interest, bank accounts not used in connection with a trade or business in the U.S., and insurance proceeds.
Estate tax treaties between the U.S. and other countries often provide more favorable tax treatment to nonresidents by limiting the type of asset considered situated in the U.S. and subject to U.S. estate taxation. Executors for nonresident estates should consult such treaties where applicable.
To learn more about US Estate Taxation, email Support@MyraWealth.com
Here’s a summarized response to the most frequently asked questions by immigrants:
- No, you do not need to pay Social Security and Medicare taxes on an F-1 visa.
- Yes, the IRS issues ITINs to foreign nationals and others who have federal tax reporting or filing requirements and do not qualify for SSNs.
- There are several firms that specialize in education loans and student loan refinancing for international students.
- Your MBA tuition maybe deductible for 2017, if you’re an international student
- Yes, contributions to a 401(k) plan are highly recommended for H1-B visa holders, even if you’re uncertain of spending your retirement years in the United States.
- Yes, you can buy a home, as mortgage companies these days are more and more comfortable in financing home loans to non-permanent residents on an H1B visa.
- The EB5 Investor Program grants immigrant entrepreneurs a green card if they invest in a commercial enterprise in the U.S. and plan to create 10 jobs for qualified U.S. workers.
- Yes. If you have a bank account or investment funds or some other type of account held outside the United States, you may need to reveal the existence of those foreign accounts to the US federal government.
- No, a foreign gift is money or other property received by a U.S. person from a foreign person that the recipient treats as a gift or bequest and excludes from gross income.
- Yes. Deceased nonresidents who were not American citizens are subject to U.S. estate taxation with respect to their U.S.-situated assets.
1 IRS.gov | Section: International Taxpayers | Sub-Section: Foreign Student Liability for Social Security and Medicare Taxes: https://www.irs.gov/individuals/international-taxpayers/foreign-student-liability-for-social-security-and-medicare-taxes
2 IRS.gov | International Taxpayers | General ITIN information: https://www.irs.gov/individuals/international-taxpayers/general-itin-information
3 Student Loan Hero | Student Loans for International Students: https://studentloanhero.com/featured/student-loans-for-international-students-private-options/
4 IRS.gov | Section: International Taxpayers | Sub-Section: Foreign Student Liability for Social Security and Medicare Taxes: https://www.irs.gov/individuals/international-taxpayers/foreign-student-liability-for-social-security-and-medicare-taxes
5 IRS.gov | Section: Retirement Plans | Sub-Section: Tax on Early Distributions: https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-tax-on-early-distributions
6 MYRA | Family Office for Immigrants in the United States: https://MyraWealth.com
7 USCIS | EB-5 Investor Program: https://www.uscis.gov/eb-5
8 Fin CEN (Financial Crimes Enforcement Network): https://bsaefiling.fincen.treas.gov/NoRegFBARFiler.html
9 IRS.gov | Section: Businesses & Self-Employed | Sub-Section: Gifts from Foreign Person: https://www.irs.gov/businesses/gifts-from-foreign-person
10 IRS.gov | Section: International Taxpayers| Sub-Section: Non-Residents with US Assets: https://www.irs.gov/individuals/international-taxpayers/some-nonresidents-with-us-assets-must-file-estate-tax-returns