F1 Student Becoming Resident Alien After 5 Years - Tax Filing Question

Thank you so much for the explanation! Does this mean I'll need to report income from my home country too? I have a small investment account back home that generates a little dividend income. Also, when exactly would my status change - would it be January 2024 since I arrived in August 2018?

Yes, as a resident alien for tax purposes, you'll need to report worldwide income, including that small investment account from your home country. It's important to report all dividend income regardless of where it's earned. Your status would change on January 1, 2024, assuming you arrived in August 2018. The 5-year exemption period would cover 2018, 2019, 2020, 2021, and 2022. Starting with the 2023 calendar year, you'd begin counting days toward the substantial presence test, and if you've been in the US continuously, you would definitely meet that test for the 2024 tax year (for taxes filed in 2025).

Did it help with figuring out foreign income reporting too? I have a rental property in my home country and I'm approaching my 5-year mark so getting nervous about this transition.

Interesting. How accurate was it compared to what your school's international student office told you? Mine gave me conflicting advice from what I found online.

It absolutely helped with foreign income reporting! It walked me through everything - foreign tax credits, reporting requirements for different types of income, the whole deal. It even flagged potential tax treaty benefits I might qualify for. The tool was definitely more accurate than my school's international office. My ISO gave me general information but couldn't handle my specific situation (I had a complex history with study abroad during my F1). The tool actually cited specific IRS regulations and publication references that my ISO advisor wasn't familiar with.

How does this actually work? Do they just call the IRS for you? Couldn't you just do that yourself?

Yeah right. Sounds like you're just trying to sell something. Nobody actually gets through to the IRS, especially not to someone who knows about international student issues. The wait times are crazy long.

They use a system that continuously redials and waits on hold for you until they reach an actual human at the IRS. When someone answers, they call you and connect you directly to the agent. It saves you from having to sit on hold for hours - you just get a call when someone's actually there. I was skeptical too! But after spending literally 3 weeks trying to get through myself (kept getting disconnected after waiting 2+ hours), I was desperate. The IRS international tax helpline is notoriously difficult to reach, especially during tax season. This service actually got me through to someone who knew about F1 student status transitions within a day.

Do you know where I can find more information about these tax treaties? I'm from India and I'd love to know if there are any benefits I can still claim.

You can find all the tax treaties on the IRS website under "Tax Treaties." For India specifically, you want to look at the US-India tax treaty. Article 21 covers students and trainees. The benefits are usually more limited for India compared to some European countries, but there are still some provisions for scholarship/fellowship grants. The treaty allows for exemption of certain amounts used for maintenance, education, or training. Publication 901 has a good summary table, but I'd recommend reading the actual treaty text for your specific situation.

Yes, it does change! F1 students are generally exempt from FICA taxes, but only if they're nonresident aliens. Once you become a resident alien for tax purposes (after 5 years), you DO have to pay FICA taxes on your wages. That caught me by surprise - suddenly my paychecks got smaller!

Great question! There's no specific form you need to file to "elect" resident alien status - it happens automatically based on the substantial presence test once your 5-year exemption period ends. The change does happen immediately on January 1st of your 6th year, so yes, for your 2025 tax return you'd file as a resident alien. One thing to keep in mind is that you might want to consider making a "first-year choice" election if you become a resident alien partway through a tax year (though in your case it sounds like it would be from the beginning of 2025). The main thing is just making sure you switch to Form 1040 instead of 1040NR and report your worldwide income. I'd also recommend double-checking your exact dates of presence to make sure you're calculating the 5-year period correctly - it can get tricky if you had any extended trips home during your studies!

Great questions! State tax residency rules are actually separate from federal rules, so becoming a federal resident alien doesn't automatically make you a California resident for state tax purposes. California has its own residency tests based on factors like where you maintain a permanent home, where your personal and economic ties are strongest, and your intent to remain in the state. However, since you've been in California for several years as a student, you might already meet California's residency requirements even before your federal status changes. I'd recommend looking into California's residency rules specifically - they're pretty detailed and different from the federal substantial presence test. As for estimated taxes, yes, that's definitely something to plan for! Once you're a resident alien, you'll likely need to make quarterly estimated payments if you have income that's not subject to withholding (like that foreign investment income). The general rule is you need to pay estimates if you expect to owe $1,000 or more in tax after subtracting withholding and credits. I'd suggest running some projections for your transition year to see what your tax liability might look like with worldwide income reporting - better to be prepared than get hit with underpayment penalties!

Just to add to what The Boss said about California - you're absolutely right to be concerned about the state tax implications! California is notoriously aggressive about claiming residency, and as an F1 student who's been there for several years, you might already be considered a California resident for tax purposes regardless of your federal status. California looks at the "totality of circumstances" including where you spend most of your time, where your belongings are, where you're registered to vote (if applicable), where you bank, etc. The fact that you've been filing as a nonresident doesn't necessarily mean you actually qualify for that status under California's rules. I'd strongly recommend reviewing FTB Publication 1031 which explains California residency rules in detail. You might want to consult with a tax professional who understands both federal immigration tax rules AND California state tax law, because getting this wrong could be expensive - California can go back and assess additional taxes plus penalties if they determine you should have been filing as a resident. The estimated tax payments are definitely something to plan for too. California requires estimates just like federal, and with your worldwide income potentially pushing you into higher brackets, the quarterly payments could be substantial. Start calculating early so you're not scrambling come January!