Immigration and Taxation: How Immigration Status Impacts Your Tax Obligations

immigration status

Understanding how immigration status impacts your tax obligations is critical for anyone living and working in the United States as an immigrant. The U.S. tax system has specific requirements based on your residency and legal status, which can impact filing requirements, tax rates, and eligibility for deductions. What should you know about immigration and taxation? As a new administration has just begun, please note that the information in this blog should always be supplemented with the most recent information available and a consultation with an experienced immigration attorney.

How Does Immigration Status Affect Tax Obligations?

The Internal Revenue Service (IRS) classifies taxpayers into two main categories: residents and non-residents. Your immigration status determines which category you fall into and how you must fulfill your tax obligations.

  • Resident Aliens: Individuals with lawful permanent resident status (green card holders) are generally taxed the same way as U.S. citizens. They must report worldwide income and fulfill their tax obligations accordingly.
  • Non-Resident Aliens: Individuals without permanent residency but who have income sourced in the U.S. may have different tax obligations, often paying taxes only on U.S.-sourced income.

Determining tax residency status depends on the Substantial Presence Test, which evaluates the number of days an individual has been in the U.S. this year and over a three-year period.

What Are the Different Tax Obligations for Different Immigration Statuses?

Each immigration status carries different tax obligations, and understanding these distinctions can prevent legal issues and financial penalties.

1. Green Card Holders

Green card holders are required to file U.S. tax returns as residents, reporting all income earned both domestically and internationally. Their tax obligations include:

  • Filing IRS Form 1040 annually
  • Reporting income from foreign sources
  • Paying Social Security and Medicare taxes on earned income

2. Non-Immigrant Visa Holders

Individuals in the U.S. on temporary visas (such as H-1B, L-1, F-1, or J-1) may be subject to different tax obligations depending on the length of their stay. Many are considered non-residents for tax purposes unless they pass the Substantial Presence Test linked above. Key tax obligations include:

  • Reporting U.S.-sourced income
  • Filing Form 1040-NR if classified as a non-resident
  • Some visa holders, such as F-1 students, may be exempt from Social Security and Medicare taxes

3. Undocumented Immigrants

Despite their immigration status, undocumented immigrants are still required to meet tax obligations. Many use an Individual Taxpayer Identification Number (ITIN) to file taxes. Tax obligations can include:

  • Filing taxes using IRS Form 1040 with an ITIN
  • Paying federal and state income taxes on earnings
  • Potential eligibility for certain tax credits, such as the Child Tax Credit

What Happens If You Don’t Satisfy Your Tax Obligations?

Failing to meet tax obligations due to immigration status misunderstandings can lead to penalties, interest on unpaid taxes, and legal complications. In some cases, non-compliance can affect immigration applications, as tax records may be reviewed during the green card application and naturalization processes.

How Can an Immigration Attorney Help You?

Given the complexities of tax obligations for individuals with different immigration statuses, seeking legal and tax guidance is highly recommended. An immigration attorney can help with:

  • Understanding tax obligations related to immigration status
  • Navigating tax treaties that may impact foreign income taxation
  • Ensuring compliance with IRS requirements while protecting immigration benefits

Partner with an Experienced Personal Immigration Attorney at The Law Office of Elizabeth Anu Lawrence

If you or a loved one need help working through the tax process, choose an experienced firm like the Law Office of Elizabeth Anu Lawrence to give you the help you need. Please give us a call at 443.352.3201. Skype and telephone consultation are both available to clients.

Contact Us

    Law Office of Elizabeth Anu Lawrence, LLC.
  • Address: 90 Painters Mill Road Suite 201 Owings Mills, Maryland 21117
  • Phone: (443) 352-3201

  • Email: info@elawrencelaw.com

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