How should I file State tax Return and federal Taxes return as a European citizen that was on F1 for half of the year (during my OPT) and H1B for the rest of the year

If you did not complete 183 days on H1-B and you are unmarried, then you file as nonresident. On the OPT income you will get treaty benefit.

If you completed 183 days on OPT and you are unmarried, then you file as Dual Status.

If you are married, then you have other options.

Thank you so much for your ansewr. What are my options if I am married?

You can file jointly with your spouse and you both CHOSE to be treated as resident aliens. This will allow you to claim the $10,700 joint standard deduction plus two $3,400 personal exemption (for yourself and your wife).

The downside is that:
- you must WAIT to meet the Substantial Test before you can file, which means you must wait until 13 May 2008.
- you must declare ALL 2007 world-wide income. There are two offsets available, by either claiming a Foreign Tax Credit (Form 1116) or a Foreign Income Exclusion (Form 2555).

Even with the downside, this is probably the best way for you to file.