Hi

I am working under H1B visa for the whole year 2005.
And my sister is studying with her F1 visa for the past 2 years (2004-now).

Can I claim her under mine for dependent or exemption for tax year 2005?

I already read about the 4 (5) requirements for tax dependent (exemptions)
1. Relation test
2. Citizenship test
3. Joint-return test
4. Support test
(5. Gross-Income test)

For my case, I definitely met the following requirements.
#1 she is my sister
#3 she is not filing a return
#4 I support more than half of her expenses
#5 she is not working

Thank you.

Unfortunately, no!

She does not meet the Test #2. She is not a U.S. citizen and, because she is under a F-1 visa, she is not a resident alien.

Thanks for clarifying.

Glad to help!

She might pass the substantial presence test though. Can she pass the second test per IRS link below?

http://www.irs.gov/businesses/small/international/article/0, id=96352,00.html

You will be considered a U.S. resident for tax purposes if you meet the substantial presence test for the calendar year. To meet this test, you must be physically present in the United States on at least:

31 days during the current year, and
183 days during the 3-year period that includes the current year and the 2 years immediately before that, counting:
All the days you were present in the current year, and
1/3 of the days you were present in the first year before the current year, and
1/6 of the days you were present in the second year before the current year.

You will be considered a U.S. resident for tax purposes if you meet the substantial presence test for the calendar year. To meet this test, you must be physically present in the United States on at least:

31 days during the current year, and
183 days during the 3-year period that includes the current year and the 2 years immediately before that, counting:
All the days you were present in the current year, and
1/3 of the days you were present in the first year before the current year, and
1/6 of the days you were present in the second year before the current year.

There is exclusion for F-1 and J-1 visa holders. Every one on F-1 is non resident for 5 year and must file nonresident tax return.
J-1 is nonresident for 2 years.
During the period exempt from residency, F- 1 and J-1 visa holders do not pay FICA taxes.

MukatA has it right.

As a student under the F-1 visa, she is EXEMPT from the Substantial Presence Test until she is in the United States for FIVE calendar years.