Hello

I'll soon be starting a postdoc in California on a J1 visa. Since my fellowship is from a UK charity I'll officially be employed by a UK university who will administer the fellowship and pay me directly. This income would normally be taxable in the uk. I'm a little unsure as to where I should be paying taxes while I'm in California. I will probably stay longer than the two year tax exempt period on the J1.

Many thanks for your help in advance.

AtlantaTaxExpert

If you stay beyond the 2-year exemption period, then the money is subject to U.S. taxes retroactive to the date of arrival. That is black-letter direct from the tax treaty.

yoninio

Yeah, sorry should have said I figured it would be subject to some tax in the US as I will be living there, but what about in the UK? Can I offset one against the other?

AtlantaTaxExpert

If you are paying taxes to the U.K on ths money, you can claim a Foreign Tax Credit (Form 1116) to offset most, if not all, of the federal tax owed on this money.

However, the Foreign Tax Credit does NOT apply to California state income tax.

yoninio

Looks like its going to be an expensive situation then!

Thanks for your comments.

AtlantaTaxExpert

Glad to help!