In the last article, we have covered the tax classification of resident vs non-resident alien, filing status info. In this article, we will cover how H1B visa holder would file taxes for H4 spouse and dependent children, including benefits and other FAQs.
What are the various tax benefits that a H1B visa holder claim?
In general, U.S. resident aliens can use the same filing statuses and can claim the same deductions allowed to U.S. citizens for the entire tax year.
- Exemptions: U.S. resident can claim personal exemptions and exemptions for dependents according to the dependency rules for U.S. citizens. Non-residents can only claim personal exemption or an exemption for spouse in case of married filing separately (when spouse has no gross income and is not filing taxes.)
- Deductions: U.S. resident aliens can claim the same itemized deductions as U.S. citizens, using Schedule-A of Form 1040. These deductions include certain medical and dental expenses, state and local income taxes, real estate taxes, interest you paid on a home mortgage, charitable contributions, casualty and theft losses, and miscellaneous deductions. If you do not itemize your deductions, you can claim the standard deduction for your particular filing status. Non-resident aliens and dual-status aliens are not allowed to claim the standard deduction and must itemize in order to claim tax deductions.
- Tax Credits: The following items are some of the credits residents may be able to claim: child and dependent care credit, credit for the elderly and disabled, child tax credit, education credits, foreign tax credit, earned income credit, and adoption credit.
Refer: Chapter 5 of https://www.irs.gov/pub/irs-pdf/p519.pdf for details.
Does an H1B visa holder get any tax benefit if his spouse and children are living in U.S. totally dependent on him?
As a family you will be able to save more taxes than being a single and claiming dependent indeed gives better tax benefits. In general, for tax purposes wife is regarded as spouse (whether on H4), not as dependent.
- Exemption: As you are already entitled to a personal exemption, which reduces your taxable income ($4,000 for 2015) and you get extra exemption for your spouse and each child you care for. Example: If husband and wife are filing jointly and have two dependent kids, they can claim in total of 4 exemptions. For tax year of 2015, in their case, total exemption was 4 x $4,000=$16,000.
- Deductions: It depends on you filing status. If you are married and your spouse is living on H4 with you, you can file as married filing jointly and can get better standard deduction ($12,600 in 2015) as compared to filing single ($6,300 in 2015).
- Tax brackets: Tax brackets are different for each filing status, so your income may no longer be taxed at the same rate as when you were single. See below for example:
|Tax rate||Taxable income for Single filers||Taxable income for Married filing jointly or qualifying widow(er)||Taxable income for Married filing separately||Taxable income for Head of household|
|10%||Up to $9,225||Up to $18,450||Up to $9,225||Up to $13,150|
|15%||$9,226 – $37,450||$18,451 – $74,900||$9,226 – $37,450||$13,151 – $50,200|
- Child Tax Credit: For each qualifying child (that you claim on your tax return), you can receive up to $1,000 child tax credit. This credit delivers a dollar-for dollar reduction in your tax bill.
Refer: https://www.irs.gov/uac/ten-facts-about-the-child-tax-credit or https://www.irs.gov/pub/irs-pdf/p972.pdf to learn if your child qualifies for child tax credit.
What are other tax benefits that can be claimed for dependent child as Internationals ?
- Additional Child Tax Credit: Its simply the refundable portion of the you Child Tax Credit. It usually works if you have lower tax liability than your actual child tax credit. Example: If your tax liability for the year is only $750 and you qualify for the $1,000 Child Tax Credit. The Child Tax Credit will reduce your tax bill to $0 and, if you qualify, the remaining $250, you will receive as the Additional Child Tax Credit
- Child and Dependent Care Credit: This Credit can reduce your tax bill if you paid for your dependent’s care to someone so that you could work or look for work. You may be able to deduct up to $3,000 for one dependent, or up to $6,000 for more than one dependent with the Child and Dependent Care Tax Credit. If your status is married filing jointly, you can only avail this credit if both spouses are either working, looking for work or attending a full time college.
Refer: https://www.irs.gov/pub/irs-pdf/p503.pdf to learn more or checking your eligibility
- Adoption Tax Credit: If you adopted a child, you may qualify for the Adoption Tax Credit apart from all other exemptions and credits relating to child.
Can I claim for my wife if she is not living with me in U.S. or has not visited U.S.?
Generally, you cannot file as married filing jointly if either spouse was a nonresident alien at any time during the tax year. However, if at the end of your tax year, one spouse is a U.S. citizen or a resident alien and the other is a nonresident alien, you can choose to treat the nonresident as a U.S. resident. You can file jointly with your wife to get maximum tax benefit. Here, each spouse must report his or her entire worldwide income on the joint income tax return. If you need to file a return, your spouse must have either a Social Security Number (SSN) or an Individual Taxpayer Identification Number (ITIN). If your spouse is not eligible to get an SSN, he or she can file Form W-7 with the IRS to apply for an ITIN. Refer to How to file ITIN for dependents for more information. You must also provide original or certified copies of documents to verify your spouse’s age, identity, and citizenship.
No, you can only claim if your child qualifies, check this for eligibility: https://www.irs.gov/pub/irs-pdf/p972.pdf
You can get passport certified from issuing agency or U.S. embassy/ consulate offices located in your country. Refer How to file ITIN for dependents
You may file only if you got married before 31st of Dec of the tax year.
According to IRS e-filed tax returns with direct deposit will be processed within 21 days of IRS e-file acceptance. For mailed paper returns – Refund processing time is 6 to 8 weeks from the date the IRS receives your tax return.
Any other thoughts to add on filing taxes for dependents in US ?
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